Final Answer:
The annual interest rate needed to earn $168.75 in Simple Interest over 2 years on an initial principal of $675.00 is 12.5%.
Step-by-step explanation:
To determine the annual interest rate for simple interest, you can use the formula:
Simple Interest (SI) = Principal (P) × Rate (R) × Time (T)
Given:
Simple Interest (SI) = $168.75
Principal (P) = $675.00
Time (T) = 2 years
We can rearrange the formula to solve for the interest rate:
R = SI / (P × T)
Plugging in the values:
R = $168.75 / ($675.00 × 2)
R = $168.75 / $1350
R = 0.125 or 12.5%
Therefore, the annual interest rate required to earn $168.75 in simple interest over 2 years with an initial principal of $675.00 is 12.5%.
In simple interest calculations, the interest earned is directly proportional to both the principal amount and the time it's invested for. In this scenario, knowing the simple interest earned and the principal amount over a given period, the rate was determined using the formula for simple interest. The result indicates that an annual interest rate of 12.5% is required to yield $168.75 in interest over 2 years on an initial amount of $675.00. This highlights the direct relationship between the interest earned, principal, and time, showcasing the fundamental principle of simple interest calculations.