First begin with the interest formula.
Interest = Principal x Rate x Time
The $250 is the principal is the amount of money invested.
The rate is 4% which translates to the decimal .04.
The time is 5 years.
So we have I = (250)(.04)(2).
Multiplying, (25)(.04) is 10 and we have 10(2) which is 20.
This means that the interest earned in 2 years is $20.
