Exercise 7 Page 171

If we borrow money from a bank, we pay the bank interest for the use of their money. Similarly, if we have an unpaid balance on a credit card, we also pay interest to the credit card company. 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 Leon charged $75 at an interest rate of 12.5 %. We want to calculate how much Leon will have to pay after one month if he makes no payments. Keep in mind that one month represents 112 of a year and that 12.5 % is written in decimal form as 0.125. p= 75, r= 0.125, t= 1/12 To calculate the interest, we will substitute these values into the simple interest formula and evaluate the right-hand side.

After one month, the interest accrued is about $0.78 if no payments are made. To find how much Leon will have to pay, we add the interest to the principal. $ 75+ $ 0.78=$ 75.78 Leon will have to pay about $75.78.