Hi! I do not understand how they came up with the principal amount in this problem. Any help is appreciated. Thank you.

*_ Question Help | Cost of a short-term bank loan! Jimmy Hale is the owner and operator of the grain elevator in Brownfield , Texas , where he has lived for most of his 62 years . The rains during the spring have been the best in a decade , and Mr. Hale is expecting a bumper wheat crop . This has prompted him to rethink his current financing sources . He now believes he will need an additional $300, 000 for the 3 - month period ending with the close of the harvest season . After meeting with his banker , Mr . Hale is puzzling over what the additional financing will actually cast . The banker quoted him a rate of 1 percent over prime ( which is currently 1 1 percent ; and also requested that the firm increase its current bank balance of $6,000 up to 20 percent of the loan . a . If interest and principal are all repaid at the end of the 3 - month loan term , what is the annual percentage rate on the loan offer made by Mr. Hale's bank' ?" b . If the bank were to offer to lower the rate to prime if interest is discounted , should Mr. Hale accept this Notice that the interest on the bank loan is not discounted in part (a ). So , you can calculate for the interest cast on the loan as follows " Interest , = principal* rate* time* Interest = $367. 500* 1 1%' + prime rate !* 190 / 350) Press Continue to SEE more