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.
Answer & explanation
Correct answer: option 4
Let Principal = P
Then Amount = \(\frac{9P }{8}\)
We know ,
Amount = Principal + Simple Interest
\(\frac{9P }{8}\) = P + Simple Interest
Simple Interest = \(\frac{P }{8}\)
Simple Interest = \(\frac{Principal ×Rate × Time }{100}\)
\(\frac{P }{8}\) = \(\frac{P ×Rate × 5 }{100}\)
\(\frac{1 }{8}\) = \(\frac{Rate }{20}\)
Rate = 2.5%