Final answer:
Bob will pay $100 in interest on a $1,000 loan with a 5% annual interest rate after 2 years, using the simple interest formula.
Step-by-step explanation:
To calculate how much interest Bob will pay after 2 years on a $1,000 loan at an annual interest rate of 5%, we can use the formula for simple interest: Interest = Principal × rate × time. Here, the principal is $1,000, the rate is 5% (or 0.05 as a decimal), and the time is 2 years.
The calculation is as follows:
- Interest = $1,000 × 0.05 × 2
- Interest = $50 × 2
- Interest = $100
Therefore, Bob will pay $100 in interest after 2 years.