Exercise 5 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 $20 in a savings account with an annual interest rate of 4 %. We want to calculate the balance after 4 years. Keep in mind that 4 % is written in decimal form as 0.04. P= 20, r= 0.04, t= 4 To calculate the interest, we will substitute these values into the simple interest formula and evaluate the right-hand side.

I=Prt

SubstituteValues

Substitute values

I= 20( 0.04)( 4)

Multiply

Multiply

I=0.8(4)

Multiply

Multiply

I=3.2

After 4 years, the interest accrued is $3.20. The new balance of the account is the sum of the old balance and the accrued interest. $ 20+ $ 3.20=$ 23.20 The balance of the account after 4 years is $ 23.20.