Simple Interest formula: SI=(P×R×T)∕100 Where: - P= Principal amount (Rs. 1,200) - R = Rate of interest per annum - T= Time (1 month = 1/12 year) Calculation: Correct Principal amount P=2,540−1,340=1,200 Interest amount I=1,205−1,200=5 Using the Simple Interest formula: 5=(1,200×R×1∕12)∕100 ⇒5=(1,200×R)∕1,200 ⇒R=5%