This isn’t such an easy question.
Is the interest tax deductible?
What is the term of the loan?
What is the inflation rate?
Are they using the traditional definition of percentage, or the one that the US government uses?
Why does the inflation rate matter? Both loans would be for the same thing. Deduction, too, would apply to both, wouldn’t it. If your interest is deductible it is deductible whether you are charged a flat amount or a percentage, so long as it is still interest and not categorized as something else. The 105 payback was just another way of saying 5%.
Clearly the point of the question was a third grade calculation test. I do think the term and terms of the loan matter, but when absent you always take it at face value without complications.