₹ 5,000 earns ₹ 500 as simple interest in 2 years. Then the rate of interest is

1. 10%

2. 5%

3. 20%

4. 2%

Given:

P = ₹ 5,000

T = 2 years

S.I. = ₹ 500

Let rate of interest be $r$.

$\because \text{S.I.} = ₹ \Big(\dfrac{P \times R \times T}{100}\Big)\\[1em] \Rightarrow \text{500} = ₹ \Big(\dfrac{5,000 \times r \times 2}{100}\Big)\\[1em] \Rightarrow \text{500} = ₹ \dfrac{10,000r}{100}\\[1em] \Rightarrow \text{500} = ₹ 100r\\[1em] \Rightarrow r = \dfrac{500}{100}\\[1em] \Rightarrow r = 5$

Hence, option 2 is the correct option.