You invest $⁢5,000 in a bond that pays a fixed annual interest rate of 4% How much interest will you earn in one year? Simple interest formula: I=P⋅r⋅t

Use the simple interest formula I = P × r × t. Substitute the principal of $5,000, the rate of 0.04, and 1 year: I = 5,000 × 0.04 × 1 = $200. The interest earned in one year is 200 dollars.

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