A sum of Rs. 12,500 amounts to Rs. 15,500 in 4 years at simple interest. What is the rate of interest?

The correct answer is 6%.

• Step 1: Total interest = 15500 minus 12500 = 3000 rupees


• Step 2: Simple interest formula is Interest = (Principal × Rate × Time) ÷ 100


• Step 3: 3000 = (12500 × Rate × 4) ÷ 100


• Step 4: 3000 = 500 × Rate


• Step 5: Rate = 3000 ÷ 500 = 6 percent