Question : A person invested Rs. 12,000 on simple interest for 7 years to obtain a total amount of Rs. 20,400 on a certain annual rate of interest. What was the rate of interest to obtain the above amount?
Option 1: 7%
Option 2: 9%
Option 3: 8%
Option 4: 10%
Correct Answer: 10%
Solution :
The formula for simple interest is I = PRT, where I is the interest, P is the principal amount, R is the rate of interest (in decimal) and T is the time period.
In this case, the total amount after 7 years is Rs. 20,400, and the principal amount is Rs. 12,000.
⇒ I = Rs. 20,400 – Rs. 12,000 = Rs. 8,400
Substituting the values into the formula,
⇒ 8400 = 12000 × R × 7
⇒ R = $\frac{8400}{12000 \times 7}$ = 0.1
In percentage,
⇒ R = 100 × 0.1 = 10%
Hence, the correct answer is 10%.
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