Final answer:
The rate of interest at which Rs 12,500 will earn Rs 5,000 in 5 years is 8%.
Step-by-step explanation:
To calculate the rate of interest that will result in a specific amount of simple interest earned on a given principal over a certain period, we can use the formula Interest = Principal × rate × time. In this case, we want to find out at what rate of interest a sum of Rs 12,500 will earn an interest of Rs 5,000 in 5 years.
The relevant formula is: Interest = Principal × rate × time. Plugging the values into the formula, we have Rs 5,000 = Rs 12,500 × rate × 5 years. To find the rate, we rearrange the formula:
Rate = Interest / (Principal × time)
Therefore, Rate = Rs 5,000 / (Rs 12,500 × 5 years)
Rate = Rs 5,000 / Rs 62,500
Rate = 0.08 or 8%
The rate of interest required is 8%.