Suresh lent out a sum of money to Rakesh for 5 years at simple interest. At the end of 5 years, Rakesh paid 9/8 of the sum to Suresh to clear out the amount. Find the rate of simple interest per annum.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e 2.5%
| Understanding | Application |
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We will use the notion of simple interest in the given time period. Simple interest = (Principal × rate of interest × time)/100 |
Let the principal be 'P' for 5 years, where interest is P/8. ⇒ P/8 = (P × r × 5)/100 ⇒ r = 20/8 ⇒ r = 2.5% |