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Simple and Compound Interest
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: B
Explanation and memory cue
The difference in amount over 3 years (from year 5 to year 8) is Rs. 12005 - Rs. 9800 = Rs. 2205, which is the simple interest for 3 years. Therefore, the interest for 1 year is Rs. 2205 / 3 = Rs. 735. The principal amount is Rs. 9800 - (5 × 735) = Rs. 9800 - 3675 = Rs. 6125. The rate of interest per annum is (Interest per year / Principal) × 100 = (735 / 6125) × 100 ≈ 12%. However, this contradicts the options, so let's re-examine: Actually, the principal is unknown, so let's calculate the interest per year as Rs. 2205 / 3 = Rs. 735. The interest for 5 years is Rs. 9800 - P, and for 8 years is Rs. 12005 - P. The difference is Rs. 2205, which is 3 years interest, so yearly interest = Rs. 735. Therefore, 5 years interest = 5 × 735 = Rs. 3675. So principal P = Rs. 9800 - 3675 = Rs. 6125. Rate = (Interest per year / Principal) × 100 = (735 / 6125) × 100 ≈ 12%. So the correct rate is 12%, which corresponds to option C. Therefore, the original correct answer C is correct. The initial confusion was in the explanation steps, but the final calculation confirms 12%.