Calculate the rate of simple interest if the principal is Rs. 12500, the final amount is Rs. 15500, and the time is 4 years.

The simple interest is the difference between the amount and the principal.

$$SI = A - P$$ $$SI = \text{Rs. } 15500 - \text{Rs. } 12500$$ $$SI = \text{Rs. } 3000$$

The formula for simple interest is $SI = \frac{P \times R \times T}{100}$.
Rearranging the formula to solve for $R$:

$$R = \frac{SI \times 100}{P \times T}$$

$$R = \frac{3000 \times 100}{12500 \times 4}$$ $$R = \frac{300,000}{50,000}$$ $$R = 6$$

The rate of interest is 6%.
Comparing this with the given options:
A. 3%
B. 4%
C. 5%
D. 6%

The correct option is D.
The rate of interest is $\boxed{\text{D. 6\%}}$.