Simple Interest
Simple Interest
In mathematics, whenever students come across the word simple interest, they wonder what simple interest is? Simple interest is nothing but a quick and easy method to calculate interest on money. Suppose we have borrowed some money from a bank or taken a loan, then the borrowed money is known as the principal amount.
Definition of Simple Interest
We borrow the money at a certain rate of interest for a certain time period. Afterward, when the time period expires, we pay back the money along with the amount of rate of interest. That amount is known as simple interest.
A loan amount is required to be returned by the person to the authorities with an extra amount that extra amount is the interest you pay on the loan.
Formula to find simple interest:
Simple interest is to be calculated in the following way
Simple interest = P * R * T / 100
Where P is equal to the principal amount
R is equal to the rate of interest
T is equal to the time period
Amount = principal + simple interest
If you have to find the principal amount
P= 100 * SI / R* T
If you have to find the rate of interest
R= 100 * SI / P * T
if you have to find the time period
T= 100 * SI / P* R
Important points for simple interest :
Principal amount means the amount which is borrowed from someone or borrowed from a bank or taken as a loan. It is denoted by P.
The rate of interest means the interest percentage at which the principal amount is given to someone for a certain period of time. The rate of interest is denoted by R.
Time means the duration for which the principal amount is given. It is denoted by T.
Amount means the total of principal plus simple interest. The amount is given at the end of the time duration along with principal and interest.
If the time duration is given in months. We have to use the same simple interest formula. The only thing we have to do is divtopicIde by 12.
SI = P * R * T / 100 * 12
if the time duration is given in days. We have to use the same simple interest formula. The only thing we have to do is divtopicIde by 365.
SI = P * R * T / 100 * 365
Example 1: Find SI and amount, if principal is Rs 10000 , Rate of interest = 10 % and time is 3 years
SI = P * R * T / 100
= 10000 * 10 * 3 / 100
= 3000
Amount = P + SI
= 10000 + 3000
= 13000
So the simple interest will be 3000 and the amount will be Rs.13,000.
Example 2: Find R if Principal = Rs 12000 , Time = 2 years and SI = 3600
R= SI * 100 / P * T
= 3600 * 100 / 12000 * 2
= 15%
So the rate of interest will be 15%
Example 3: find simple interest, if principal is equal to 30,000 rate of interest is equal to 5% and time is 6 months
SI= P * R * T / 100 * 12
= 30000 * 5 * 6 /100 * 12
=750
Simple interest will be Rs.750.
