Last year a firm paid a festival bonus of 12% of its yearly pay bill. This year its pay bill is 25% higher and the bonus rate has been cut to 10%. What is the change in the bonus amount paid?

Take the old pay bill as 100. Old bonus = 12. New bonus = 10% of 125 = 12.5. The change is 0.5/12 = 0.0417, a rise of 4.17%. A lower rate on a bigger base can still pay out more, which is the whole point of the question. 'A fall of 2%' reads the 2-point cut in the rate as the change in the amount - percentage points and per cents are different things. 'A rise of 25%' watches only the pay bill and forgets the rate cut. 'A fall of 16.67%' is the rate's own fall (2/12) with the changed base ignored.