-   Here, P = Rs. 5000, I = Rs. 500, T = 5 years.   Therefore, using the formula   R = 100 x I     P x T     We have, rate of interest (R) = 100 x 500  = 2% p.a.   5000 x 5  

Simple interest is calculated on the original amount of the principal only and not on the accumulated interest.

Formula for calculating Simple Interest (SI):
SI = (Principal Amount × Interest Rate × Time Period)/100

Given,
Principal Amount (P) = Rs. 5000
Time Period (T) = 5 years
Interest Received by Ganesh (I) = Rs. 500

To calculate the rate of interest, we need to equate the given formula for Simple Interest with the given data.

SI = (Principal Amount × Interest Rate × Time Period)/100
⇒ 500 = (5000 × Interest Rate × 5) / 100
⇒ Interest Rate = 500 × 100 / (5000 × 5)
⇒ Interest Rate = 2%

Hence, the rate of interest per annum is 2%.