Multiple choice

Simple interest on a sum of money is 1/25 of the principal and the number of years is equal to the rate percent per annum is: then rate of interest is

  1. 21/2%

  2. 2%

  3. 31/2%

  4. 11/2%
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B Correct answer
Explanation

SI = P/25. SI = (P * R * T) / 100. Given R = T. P/25 = (P * R^2) / 100. 1/25 = R^2 / 100. R^2 = 4. R = 2%.

AI explanation

Using the simple interest formula, Simple Interest equals Principal multiplied by Rate multiplied by Time divided by 100. Since the interest is 1/25 of the principal and the time equals the rate, we get Principal divided by 25 equals Principal multiplied by Rate multiplied by Rate divided by 100. Canceling the principal and solving for Rate gives Rate squared equals 4, so the rate of interest is 2 percent.

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