To answer this question, we need to use the next formula for simple interest:
[tex]FV=PV\cdot(1+in)[/tex]Where:
FV is the future value we need to find (in this case).
PV is the present value, that is, $400 (in this case).
i is the interest rate. In this case, we have 8% (0.08).
n is the number of periods (n = 3, in this case).
Then, we have:
[tex]FV=400\cdot(1+(0.08)\cdot3)\Rightarrow FV=496[/tex]That is, the FV is $496. Therefore, the simple interest is $(496-400 = 96).
Thus, the amount of simple interest that $400 would earn at 8% per year by the end of 3 years is $96 (option A).
In other words, the result can be obtained also if we have is $400 * (0.08)*3 = $96.
