The method of determining the monthly interest amount by adding the interest and loan principal together and dividing by the number of payments is the

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The add-on interest method involves adding the total interest to the loan principal upfront and then dividing this total by the number of payments to determine the monthly payment amount. This method does not reduce the principal first before calculating the interest for the next period, unlike methods that calculate interest on the declining balance.

The Method of Determining the Monthly Interest Amount by Adding