Use the simple interest formula I=Prt, where I is the interest, P the principal, r the annual interest rate, and t the time in years.
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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 $\col{\$900}$ in a savings account with we earn $\colII{\$54}$ simple interest in $\colIII{18}$ months. We want to calculate the annual rate. Keep in mind that $18$ months represents $\colIII{\frac{18}{12}}$ years.
\begin{gathered}
\col{P}=\col{900}, \quad \colII{I}=\colII{54}, \quad \colIII{t}=\colIII{\dfrac{18}{12}}
\end{gathered}
To calculate the interest, we will substitute these values into the simple interest formula and solve the resulting equation for $r.$
