Harold balance in his savings account was $10,000. The savings account earns annual simple interest. At the end of 3 yeah, the balance of the account was $11,875. If Harold did not make additional deposits or withdrawals, what was the approximate annual interest rate on the savings account?

In the simplest of words, $1,000 at 1% interest per year would yield $1,010 at the end of the year. But that is simple interest, paid only on the principal. Money in savings accounts will earn compound interest, where the interest is calculated based on the principal and all accumulated interest.

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