Multiple choice

The simple interest on a sum is (\frac{7}{8}) of the principal for 10 years. What is the rate (in percentage) of interest per annum?

  1. 7.5

  2. 8.75

  3. 7

  4. 11.25
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B Correct answer
Explanation

Simple Interest = P×R×T/100. Given SI = (7/8)P for 10 years. So (7/8)P = P×R×10/100. Cancel P: 7/8 = R/10. Therefore R = 70/8 = 8.75% per annum. This formula directly relates interest rate to the ratio of simple interest to principal over time.

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