SOLUTION: I have this question on my homework: You put $500 in a savings account. The account earns $15.75 simple interest in 6 months. What is the annual interest rate? I know the formula i

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Question 726666: I have this question on my homework: You put $500 in a savings account. The account earns $15.75 simple interest in 6 months. What is the annual interest rate? I know the formula is r=I%2FPt But how do I set the problem up?
Answer by KMST(5328) About Me  (Show Source):
You can put this solution on YOUR website!
r=I%2FPt
I= Interest earned
P= Principal (amount deposited)
t= time (in years, because you want the annual interest rate)
r= Interest rate (expressed as a decimal)

For your problem
r=15.75%2F%28500%2A0.5%29 or r=15.75%2F%28500%2A%281%2F2%29%29
That is r=15.75%2F250 --> r=0.063
The annual interest rate is 6.3%.

MENTAL MATH
If you had left the money in that account for 1 year, you would have earned double the amount you earned in interest.
If you had been able to deposit twice as much ($1000) and let that money earning interest for 1 year you would have earned 4 times as much as you did.
15 dollars is 60 quarters, so 15.75 dollars is 63 quarters.
4 times 63 quarters is 63 dollars.
$1000 would earn $63 in 1 year, so $100 would earn $6.30 in a year,
so the annual interest rate is 6.3%.
I can think through that a lot faster than I can type it.