Simple Interest

Simple Interest

Interest is defined as money charged for borrowing the money from someone /banks. There are four words mainly used in this category.

Principal
• It is denoted by P (Principal). 

The principal is the amount of money borrowed for a certain time.

Rate of interest • It is denoted by R ( Rate of interest ).

Money paid for Rs. 100 per year called rate of interest.

Amount
• It is denoted by A ( Amount ). The sum of Principal and interest is called amount.

Time• Denoted by T ( Time ). It is the period for which we borrowed money is called Time.

Simple Interest • Simple interest is denoted by SI. If the interest is calculated on the amount which we borrowed at any rate of interest for any period of time is called simple interest.

Basic Formulas Simple Interest = ( Principal * Time * Rate)/100

Principal = ( Simple Interest * 100 ) / (Time * Rate )

Time = ( Simple Interest * 100 ) / (Principal * Rate )

Rate = ( Simple Interest * 100 ) / ( Time *Principal )

Amount = Principal + Simple Interest

Example sum1. Find the simple interest on Rs. 68000 at[ 50/3 ] % per annum for 9 months?
Principal = Rs. 68000
Rate=(50/3)%
Time = (9 / 12 ) years
( 3 / 4 ) years
Simple interest = ( Principal * Rate * Time)/100
= Rs.[ (68000*(50/3)*(3/4))/100]
= Rs.[ (68000* 50*3)/(50*4*100)]
= Rs. 8500

2. Rs. 800 amounts to Rs. 920 in 3 years at simple interest. If the interest rate is increased by 3%, it would amount to how much?
Principal = 800
Simple interest = 120
Time = 3 year
Rate = ( 100 * Simple interest ) / (Principal * Time )

= 5%
New rate = 8 %
Principal = 800
Time = 3 year
Simple Interest = ( Principal * Rate * Time)/100
= 192
New Amount = Principal + Simple Interest
New amount = 800 + 192
= Rs. 992

3. A man took loan from a bank at the rate of 8% per annum. simple interest. After 4 years he had to pay Rs. 6200 interest only
for the period. Find the principal amount borrowed by him ?
Time = 4 years
Simple Interest = Rs. 6200
Rate = 8%
Principal = ( 100 * Simple Interest ) / (Rate * Time )
= (100 *6200)/(8*4)

= Rs. 19375

4. How much time will it take for an amount of Rs. 450 to yield Rs. 81 as interest at 4.5% per annum of simple interest?
Simple interest= Rs. 81
Rate = 4.5%
Principal = Rs. 450
Time = ( 100 * Simple Interest ) / (Principal * Rate )

= (100*81)/(450*4.5)

= 4 years

5.A four years NSC certificate was purchased for Rs. 500 with Rs. 

1000 being the maturity value. Find the rate of Simple interest?

Principal = Rs. 500

Simple Interest = Rs. 500

Time = 4 years

Rate = ( 100 * Simple Interest ) / (Principal * Time )
= (100 * 500)/ ( 500*4)
=100/4
= 25%