To calculate the interest earned on a bond with a fixed annual interest rate, we can use the formula for simple interest:
\[ \text{Interest} = \text{Principal} \times \text{Rate} \times \text{Time} \]
In this case:
- Principal = $10,000
- Rate = 5% = 0.05
- Time = 2 years
Now we can plug the values into the formula:
\[ \text{Interest} = 10,000 \times 0.05 \times 2 \]
Calculating this:
\[ \text{Interest} = 10,000 \times 0.05 = 500 \] \[ \text{Interest} = 500 \times 2 = 1,000 \]
So, after two years, Tom will have earned approximately $1,000 in interest.