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.

2.5% p.a.

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%