Question

An amount becomes 5 times its original value in 25 years. What is the rate of simple interest per annum?

• A. 16%
• B. 12%
• C. 20%
• D. 14%

Hint:

Use the formula SI = \frac{P \times R \times T}{100} and relate the increase in amount to find the rate.

Answer 1

The Correct Option is A

Let the principal amount be P, rate of interest per annum be R%, and time T = 25 years.
The amount after 25 years is 5 times the principal, so:
\[A = 5P\]
Simple Interest (SI) = Amount - Principal =
\[SI = 5P - P = 4P\]
Formula for Simple Interest:
\[SI = \frac{P \times R \times T}{100}\]
Substitute values:
\[4P = \frac{P \times R \times 25}{100}\]
\[4 = \frac{25R}{100} = \frac{R}{4}\]
Multiply both sides by 4:
\[16 = R\]
So the rate is 16%.