Townbank offers a term deposit account that pays investors 12.5% simple interest per annum on investments over $100,000 for periods of 2 years or more. Peta invests $150,000 in this simple interest account for exactly 2 years. How much simple interest, in dollars, will Peta earn at the end of the investment period?

Introduction / Context:
This aptitude question checks understanding of basic simple interest on a term deposit. When a bank advertises a rate like 12.5 percent per annum, the investor needs to be able to calculate the interest earned over a given number of years on a known principal. This is a direct and very common real life application in banking and personal finance, such as fixed deposits and term investment accounts.

Given Data / Assumptions:

Principal deposited by Peta = $150,000
Annual simple interest rate = 12.5 percent per annum
Investment term = 2 years
Interest is calculated using simple interest, not compound interest
Assume there are no additional deposits or withdrawals during the term

Concept / Approach:
Under simple interest, interest is calculated only on the original principal throughout the entire term. The formula is:
Simple interest I = P * R * T where P is the principal, R is the annual rate expressed as a decimal, and T is the time in years. Once interest is found, that is Peta's earnings in dollars, and the maturity amount would be principal plus interest. Here the question only asks for the interest amount, not the final balance.

Step-by-Step Solution:
Step 1: Identify the principal P = 150,000 dollars. Step 2: Convert the annual rate R from percent to decimal. R = 12.5 percent = 12.5 / 100 = 0.125. Step 3: Identify the time T in years. Here T = 2 years. Step 4: Substitute into the simple interest formula. I = P * R * T = 150,000 * 0.125 * 2. Step 5: Calculate the product. 150,000 * 0.125 = 18,750. Step 6: Multiply by 2 years: I = 18,750 * 2 = 37,500 dollars.

Verification / Alternative check:
An alternative way is to note that 12.5 percent is equal to one eighth. One eighth of 150,000 is 150,000 / 8 = 18,750. That is the interest for one year. For two years of simple interest, simply double 18,750 to get 37,500 dollars. This mental check matches the earlier calculation and confirms the answer is consistent and reasonable for the given rate and principal.

Why Other Options Are Wrong:
Option $57,500 would correspond to a much higher effective rate or a longer term than 2 years. Option $47,500 also overstates the interest compared with 12.5 percent per year on 150,000. Option $67,500 is even larger and clearly incompatible with a 2 year term at 12.5 percent. Only 37,500 dollars matches the simple interest formula applied to the given figures.

Common Pitfalls:
A common mistake is to treat the 12.5 percent rate as if it were applied for each of the two years separately and then compounded, which would be a different problem. Another frequent error is misreading the principal as 100,000 instead of 150,000 or miscalculating the decimal form of 12.5 percent. Candidates should always convert the rate to decimal carefully and verify that the time is measured in years when using the standard simple interest formula.

Final Answer:
Peta earns a total simple interest of $37,500 at the end of the 2 year deposit period.