Based on the information given, the simple interest rate that will be earned will be 13.6%.
Simple Interest = PRT / 100
1250 = (5250 × 1.75 × R) / 100
Cross multiply
125000 = 9187.5R
R = 125000 / 9187.5
R = 13.6%
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The annual simple interest rate that an investment of $5,250 will earn to be worth $6,500 in 21 months is 13.6%.
Simple interest refers to the interest calculated only on the principal.
With the simple interest method, the borrower only pays interest on the principal without considering the previously-accumulated interests.
Principal = $5,250
Future value = $6,500
Period or time = 21 months or 1.75 years (21/12)
Simple interest = $1,250 ($6,500 - $5,250)
Rate = Interest x 100/Principal x Time
Rate = 13.6% ($1,250 x 100/$5,250 x 21/12)
Thus, the annual simple interest rate that an investment of $5,250 will earn to be worth $6,500 in 21 months is 13.6%.
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