Question: If you borrow $500 at 7% simple interest for 5 years, how much interest will you owe the creditor at the end of the term?
1. **State the problem:** Calculate the simple interest on a loan of $500 at an interest rate of 7% over 5 years.
2. **Formula for simple interest:**
$$I = P \times r \times t$$
where:
- $I$ is the interest,
- $P$ is the principal amount,
- $r$ is the annual interest rate (in decimal),
- $t$ is the time in years.
3. **Convert the interest rate to decimal:**
$$r = \frac{7}{100} = 0.07$$
4. **Substitute the values into the formula:**
$$I = 500 \times 0.07 \times 5$$
5. **Calculate the interest:**
$$I = 500 \times 0.07 = 35$$
$$I = 35 \times 5 = 175$$
6. **Interpretation:**
The interest owed at the end of 5 years is $175$.