The simple interest amount that $400 principal will earn in 2 years at the rate of 5% is $40.
Data and Calculations:
Principal amount = $400
Simple Interest rate = 5% p.a.
Time = 2 years
Simple interest amount = $40 ($400 x 5% x 2)
The simple interest does not enjoy the power of compounding that increases savings.
Thus, the simple interest that the principal will earn in 2 years at the rate of 5% is $40.
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