Answer: $ 480. This is because simple interest is just applied to the principal amount of the Loan.
Step-by-step explanation:
Is better if you know that there is simple interest and compound interest.
Simple interest is applied just to the principal loan.
Compound interest is applied to the principle and the period interest.
Because the question is just for the Simple interest we can use the formula to find the interest:
P*i*n
For the total amount returned (paid back) would be: P + P*i*n
Where P is the principal (loan) = $ 400
i is the simple interest rate: 5%
n is the Period of time= 4 years.
Just Replace.
Therefore the simple interest is: P*i*n = $400*5%*4 = $80
The total amount Payed back is= P+P*i*n = $400 + $400*5%*4 = $ 480