Tom invests $10,000 in a bond with a 5% annual interest rate. After two years, how much will he have approximately earned in interest?

Answer 1

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.