Final answer:
To determine the amount of the initial investment after five years of earning interest, we can use the formula for compound interest. The initial investment was approximately $1,010.85.
Step-by-step explanation:
To determine the amount of the initial investment, we can use the formula for compound interest. Let's assume the initial investment is P dollars. After five years, the investment has earned $1,200 in interest. The formula for compound interest is:
A = P(1 + r)^n
where A is the final amount, P is the initial investment, r is the annual interest rate (as a decimal), and n is the number of years. In this case, we have:
$1,200 = P(1 + 0.04)^5
Simplifying this equation, we get:
P = $1,200 / (1.04^5)
Using a calculator, we find that P is approximately $1,010.85. Therefore, the initial investment was approximately $1,010.85.