Narmada deposits Rs. 8000, which amounts to Rs. 9200 after 3 years at simple…

Simple Interest is SI = (P × R × T) / 100, where P is the principal, R the annual rate, and T the time in years. If the rate changes while the principal and time stay the same, the interest for the same period changes in direct proportion to the change in rate — so the original rate must first be recovered from the given interest before the new rate can be applied.

1. Interest actually earned: SI = Amount − Principal = 9200 − 8000 = Rs. 1200, for P = Rs. 8000 and T = 3 years.

2. Original rate: R = (SI × 100) / (P × T) = (1200 × 100) / (8000 × 3) = 5%.

3. Increased rate: new R = 5% + 2% = 7%.

4. New interest at the increased rate: new SI = (P × new R × T) / 100 = (8000 × 7 × 3) / 100 = Rs. 1680.

5. New amount: Principal + new SI = 8000 + 1680 = Rs. 9680.

Cross-check: each 1 percentage point of rate on Rs. 8000 for 3 years is worth (8000 × 3) / 100 = Rs. 240 of interest. A 2-point rate increase therefore adds 2 × 240 = Rs. 480 to the original interest of Rs. 1200, giving Rs. 1680 — the same figure obtained above, confirming the new amount of Rs. 9680.