Use the simple interest formula below to solve the following problem:

I= PRT

I is the interest

P is the principal or the amount borrowed

R is the interest rate

T is the time in years

Suppose you start a new bakery and you obtain a bank loan for $250,000. The bank loan is critical to obtaining the necessary equipment to begin producing and selling your cupcakes with the hope of generating revenue and ultimately a profit. The bank loan agrees to defer any payments of principal or interest for the first 12 months. In month 13, you are required to make your first payment which will include only interest for the first year at an interest rate of 3% per year. Answer the following questions:

1) How much interest will your business need to pay in month 13?

2) How much of the principal of the loan would you have paid in month 13?

3) Reflecting on your answers for #1 and #2 above, what are the advantages and disadvantages of the type of business loan described above?