Answer: $125
Explanation: First begin with the interest formula which is below.
Interest = principal · rate · time
In this problem, we're solving for the interest.
The <em>principal</em> is the amount invested of $500.
The <em>rate</em> is 5% which we can write as .05.
The <em>time</em> is 5 years.
So we have I = (500)(.05)(5).
Now we multiply.
(500)(.05) is 25 and (25)(5) is 125.
This means that the interest earned is $125.