Exercise 2 Page 267

If we borrow money from a bank, we pay the bank interest for the use of their money. Similarly, if we open a savings account, the bank deposits extra money on this account as interest. To calculate the interest I, we use the simple interest formula. I= P r t, where... I& = Interest P& = Principal r& = Annual interest rate t& = Time (in years)We know that we deposit $350 in a savings account with we earn $17.50 simple interest in 2.5 years. We want to calculate the annual rate. P= 350, I= 17.5, t= 2.5 To calculate the interest, we will substitute these values into the simple interest formula and solve the resulting equation for r.

I=Prt

SubstituteValues

Substitute values

17.5=( 350)( r)( 2.5)

DivEqn

.LHS /(350)(2.5).=.RHS /(350)(2.5).

17.5/(350)(2.5)=(350)( r)(2.5)/(350)(2.5)

CancelCommonFac

Cancel out common factors

17.5/(350)(2.5)=(350)( r)(2.5)/(350)(2.5)

SimpQuot

Simplify quotient

17.5/(350)(2.5)= r

Multiply

Multiply

17.5/875= r

CalcQuot

Calculate quotient

0.02= r

RearrangeEqn

Rearrange equation

r=0.02

Since the decimal number 0.02 is equal to 2%, the annual interest rate is 2%.