The correct answer is A. 23.5 %.
Let $P$ be the principal amount, $r$ be the interest rate, and $t$ be the time in years. The simple interest is given by $I = Prt$. In this case, the interest is deducted from the loan at the time the money is borrowed, so the effective interest rate is higher than the nominal interest rate.
To calculate the effective interest rate, we can use the following formula:
$$\text{Effective interest rate} = \frac{1 + \frac{I}{P}}{1 + \frac{rt}{100}} – 1$$
In this case, we have $P = 100000$, $r = 20\%$, and $t = 1$ year. Substituting these values into the formula, we get:
$$\text{Effective interest rate} = \frac{1 + \frac{100000 \times
20}{100 \times 100000}}{1 + \frac{20 \times 1}{100}} – 1 = 23.5\%$$Therefore, the actual rate of interest is 23.5%.
Option B is incorrect because it is the nominal interest rate. Option C is incorrect because it is the simple interest rate. Option D is incorrect because it is the effective interest rate for a loan with a simple interest rate of 25%.