The interest earned in five years is $1400.
What is simple interest?
Simple interest is interest calculated on the principal portion of a loan or the original contribution to a saving account.
Formula for simple interest
A = P(1 + rt)
Where,
A is the final amount
P is the initial principal balance
r is the annual interest rate
t is time(in years)
According to the given question
We have
Initial Principal balance, P = $7000
Time, t = 5years
Annual interest rate, r = 4% = 0.04
Therefore, the amount in five years is given by
A = 7000(1 + 0.04(5))
A = 7000(1 + 0.2)
A = 7000(1.2)
A = $8400
Now, the interest earned in five years
S.I = A - P
⇒ S.I = $8400 - $7000
⇒ S.I = $1400
Hence, the interest earned in five years is $1400.
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