# Simple Interest: Basic Concepts, Formulas

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Principal – The money which is borrowed or lent for a certain period of time is called Principal or the Sum.

Interest – The extra money which is paid along with the principal.

Amount = Principal + Interest

Simple Interest – If the interest is reckoned uniformly then it is called Simple Interest.

Let say;

P = Principal

R = Rate % per annum

T = Time in years, Then-

SI = [(P × R × T)/100]

#### Examples

Q-1.  Find the Simple Interest on Rs. 1000 at 10% per annum for a period of 2 years?

Solution

Given-

P = 1000, R = 10%, T = 2 years

SI = P × R × T/100

SI = (1000 × 10 × 2)/100 = Rs. 200

So, the Simple Interest on Rs. 1000 will be 200 after 2 years.

Q-2. At what rate percent per annum will a sum of money is doubled in 16 years? (RRB 2003)

Solution –

Let the Principal = P

Amount = 2P (Since it is doubled)

So, Interest = Amount (A)- Principal (P)

= 2P – P = P

Now,

SI = P × R × T/100

P = (P × R × 16)/100

After rearranging the Equation we get,

R = [(100 × P)/(P × 16)] = 25/4 % per annum.

Q-3 Let Mohan deposits Rs. 25000 in the bank. The bank gives an interest rate of 10%  p.a. How much he will receive after 5 years 6 months.

Sol-  P= Rs. 25000, R = 10% p.a. T = 5 years 6 months = 5(6/12) = 11/2 years

Interest = P × R × T/100

=  (25000 × 10 × 11/2)/100 = Rs. 13750

So, the Amount Received will be = P + SI = Rs. (25000 + 13750) = Rs. 38750