Work Step by Step
Use the simple interest formula: I=Prt The interest is 75. The annual interest rate is 0.04. The time is 1 year. You have to find the principal. Substitute all the values and solve: 75=p(0.04)1 75=0.04P 1875=P Using the principal, we find the interest for the second year: I=1875(0.04)(2-1) I=75(1) I=75 The interest for the following year is $75.