to go on a summer trip, john borrows $400. he makes no payments until the end of 6 years, when he pays off…

to go on a summer trip, john borrows $400. he makes no payments until the end of 6 years, when he pays off the entire loan. the lender charges simple interest at an annual rate of 4%. answer the following questions. if necessary, refer to the list of financial formulas. (a) how much total interest will john have to pay? (b) what will the total repayment amount be (including interest)?

to go on a summer trip, john borrows $400. he makes no payments until the end of 6 years, when he pays off the entire loan. the lender charges simple interest at an annual rate of 4%. answer the following questions. if necessary, refer to the list of financial formulas. (a) how much total interest will john have to pay? (b) what will the total repayment amount be (including interest)?

Answer

Explanation:

Step1: Identify simple - interest formula

The simple - interest formula is $I = Prt$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the time in years.

Step2: Convert the interest rate to decimal

Given $r = 4%=0.04$, $P=$400$, and $t = 6$ years.

Step3: Calculate the total interest

$I=Prt=400\times0.04\times6 = 96$

Step4: Calculate the total repayment amount

The total repayment amount $A$ is the sum of the principal $P$ and the interest $I$. So $A=P + I=400+96 = 496$

Answer:

(a) $96 (b) $496