What is simple interest ?
If the interest on a sum borrowed for a certain period is reckoned uniformly, then it is called simple interest.
By definition, simple interest is the interest amount for a particular principal amount of money at some rate of interest.
Simple interest = (PRT/100)
P = Principal, R = Rate of interest per annum and T = number of years
R can be converted as decimal from percentage, then don't have to use the denominator as 100.
To find amount,
Amount = Simple interest over a period of time + Principal
Find the simple interest charged when :
Example 1 :
$5000 is borrowed for 1 year at 12% per annum simple interest
Solution :
Principal P = $5000, R = 12%, T= 1 year
Simple interest I = (P × T × R)/100
= (5000 × 12)/100
= 60000/100
= 600
Simple interest for 1 year is $600.
Example 2 :
$2500 is borrowed for 2 years at 8% per annum simple interest
Solution :
P = $2500, R = 8%, T= 2 years
Simple interest I = (P × T × R)/100
= (2500 × 2 × 8)/100
= 40000/100
= 400
Simple interest for 2 years is $400.
Example 3 :
$40000 is borrowed for 5 years at 11% per annum simple interest
Solution :
P= $40000, R = 11%, T = 5 years
Simple interest I = (P × T × R)/100
= (40000 × 5 × 11)/100
= 2200000/100
= 22000
Simple interest for 5 years is $22000.
Example 4 :
$250000 is borrowed for 9 months at 20% per annum simple interest.
Solution :
P = $250000, Rate R = 20%, Time T= 9 months
1 year = 12 months
Time T = 9/12 ==> 3/4
Simple interest I = (P × T × R)/100
= (250000 × 3/4 × 20)/100
= 3750000/100
= 37500
Simple interest for 9 months is $37500.
Find the
total amount needed to repay a loan of :
Example 5 :
$2400 borrowed for 3 years at 10% per annum simple interest.
Solution :
P = $2400, R = 10%, T = 3 years
Simple interest I = (P × T × R)/100
= (2400 × 3 × 10)/100
= 72000/100
= 720
Simple interest for 3 years is $720.
Total amount = P + I
= 2400 + 720
= 3120
So, total amount is $3120.
Example 6 :
$8000 borrowed for 7 years at 12% per annum simple interest
Solution :
P = $8000, R = 12%, T = 7 years
Simple interest I = (P × T × R)/100
= (8000 × 7 × 12)/100
= 672000/100
= 6720
Simple interest for 7 years is $6720.
Total amount = P + I
= 8000 + 6720
= 14720
So, total amount is $14720.
Example 7 :
$7500 borrowed for 2 1/2 years at 8% per annum simple interest.
Solution :
P = $7500, R = 8%, T = 5/2 years
Simple interest I = (P × T × R)/100
= (7500 × 5/2 × 8)/100
= 150000/100
= 1500
Simple interest for 2 1/2 years is $1500.
Total amount = P + I
= 7500 + 1500
= 9000
So, total amount is $9000.
Example 8 :
$23000 borrowed for 4 months at 15% per annum simple interest.
Solution :
P = $23000, R = 15%, T= 4 months
1 year = 12 months, T = 4/12 ==> 1/3
Simple interest I = (P × T × R)/100
= (23000 × 1/3 × 15)/100
= 115000/100
= 1150
Simple interest for 9 months is $1150.
Total amount = P + I
= 23000 + 1150
= 24150
So, total amount is $24150.
Example 9 :
Kyle borrows $25000 at 6% p.a. Simple interest for 4 years.
(a) Find the total amount needed to repay the loan.
(b) Calculate the monthly repayment required to pay this loan off in 48 equal instalments.
Solution :
P = $25000, R = 6%, T = 4 years
Simple interest I = (P × T × R)/100
= (25000 × 4 × 6)/100
= 600000/100
= 6000
Simple interest for 4 years is $6000.
Total amount = P + I
= 25000 + 6000
= 31000
So, total amount is $31000.
(b) Amount is being paid for 48 equal monthly instalments.
$31000 = 48 months
= 31000 ÷ 48
Instalment amount for a month = $645.83
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