If the simple interest on a sum of money is 40% of the principal over 8 years, what is the annual interest rate?

Question: If the simple interest on a sum of money is 40% of the principal over 8 years, what is the annual interest rate?

Solution:
We know, Simple Interest, I = Pnr

Given,
Simple Interest = 0.4 × Principal (since 40% of the principal)
= 0.4 × P

Where, Principal = P
Rate = r
Time, n = 8 years

So, 0.4 × P = P × 8 × r
⇒ r = 0.4/8
⇒ r = 0.05 × 100%
∴ r = 5%