Explanation:

if R is rate of depreciation of machine , P is the initial amount of machine , A is final amount of machine and n is the time taken to depreciate then use formula, 

here, P = 32768 , A = 21952 and n = 3 

then, 21952 = 32768(1 - R/100)³ 

21952/32768 = (1 - R/100)³ 

(28/32)³ = (1 - R/100)³ 

7/8 = 1 - R/100 

1 - 7/8 = R/100

1/8 = R/100

R = 100/8 = 12.5 %

Hence, option 2 is the correct answer.