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A sum of money amounts to Rs. 9800 after 5 years and Rs. 12005 after 8 years at the same rate of simple interest. The rate of interest per annum is:

Correct answer: C. 12%

  • A. 5%
  • B. 8%
  • C. 12%
  • D. 15%

Explanation

The increase over the extra 3 years is Rs. 12,005 - Rs. 9800 = Rs. 2205, so yearly interest is Rs. 2205/3 years = Rs. 735 per year. The principal is Rs. 9800 - (Rs. 735 x 5 years) = Rs. 6125, and the rate is Rs. 735/Rs. 6125 x 100 = 12% per annum. The likely trap is 8%, found by calculating interest against the amount after 5 years instead of the principal.

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