Cash Borrowing Question Accounting

Question

Foster Inc is wondering if their cash balance might be below their minimum desired balance of $50,000 on May 1. In that case, the company will borrow cash from a bank on the first day of May. Assume that the borrowing can be made in multiple of $100, but bears interest at 2% per month. The May interest will be paid in cash on May 31. What is the closest amount of cash that must be borrowed on May 1 if the shortage is expected to be $4,000?
A) 4,082

B) 4,100

C) 4,200

D) 4,000

E) None

Answer was B) but I need help with steps as to how.

Answer 1

the company needs to borrow $4,000 plus enough money to pay the interest, which will be $80 ($4,000 x 0.02)

 

since they must borrow in increments of $100, they will have to borrow $4,100