Exercise 16 Page 269

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 $1500 in a savings account with we earn $562.50 simple interest in 5 years. We want to calculate the annual rate. P= 1500, I= 562.5, t= 5 To calculate the interest, we will substitute these values into the simple interest formula and solve the resulting equation for r.

Since the decimal number 0.075 is equal to 7.5%, the annual interest rate is 7.5%.