Short-term financing through bank loans

Minuteman Cafe Inc. needs to take out a one-year bank loan of $400,000 and has been offered several different terms. One bank has offered a loan with 10% simple interest that requires monthly payments. The loan principal will be paid back at the end of the year.

Based on a 360-day year, what will be the monthly payment for June? (Hint: Remember that June has 30 days.)

$2,833.33

$3,333.33

$3,500.00

$3,666.66

Another bank has offered 7% add-on interest to be repaid in 12 equal monthly installments. What is the monthly payment on this add-on interest loan?

$35,666.67

$37,450.00

$39,233.34

$30,316.67

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