Using the simple interest formula:
I = P • r • t
where:
I = interest on the loan
P = principal (loan amount) = $400
r = interest rate = 6% or 0.06
t = time = 60 days or 2/12 months
Substitute the given values into the formula:
I = P • r• t
I = $400 • 0.06 • 2/12
I = $4
Therefore, the student pays $4 in interest if the loan is paid back within 60 days.
