Question : A financial institution claims that it returns three times the principal in 25 years on a certain rate of simple interest per annum. What is the rate of simple interest?
Option 1: 8%
Option 2: 6%
Option 3: 4%
Option 4: 5%
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Correct Answer: 8%
Solution :
Let the sum be $P$.
Amount (A) = $3P$
Simple Interest (SI) = A – P = $2P$
Rate of interest = $R$%
Time = 25 years
Simple interest = $\frac{\text{Principal × Rate × Time}}{100}$
⇒ $R=\frac{100×2P}{P×25}$
⇒ $R=8$
Hence, the correct answer is 8%.
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