Answer:
Explanation:
We can use the formula for simple interest to calculate the principal amount that must be invested to earn $20 over four years at an interest rate of 5%:
I = P × r × t
where:
I = interest earned = $20
P = principal amount
r = interest rate per year = 5% = 0.05
t = time period in years = 4
Substituting the given values, we get:
$20 = P × 0.05 × 4
Simplifying and solving for P, we get:
P = $20 / (0.05 × 4) = $20 / 0.2 = $100
Therefore, a principal amount of $100 must be invested to earn $20 over four years at an interest rate of 5%