Simple Interest is an easy method of finding Interest Over a Loan/ Principal Amount. It is necessary to recall the concept of Interest and Ways to Calculate it. The Concept of Simple Interest is Applicable in Many Sectors such as Automobile, Finance, Banking, etc. Whenever you borrow money from a bank or someone you need to repay along with an extra amount. Get to know the Simple Interest Definition, Formula, and How to find the Simple Interest in the later modules.
What is Simple Interest?
Simple Interest is the method of finding the Interest Over a Certain Amount. When you borrow from a bank you need to return back some extra money while paying. While returning back the amount it depends on the rate of interest as well as the time for which you borrow.
How to find the Simple Interest?
Formula to Calculate the Simple Interest will give you the Interest Amount if Principal, Rate of Interest, Time Duration are Given.
SI = (P*T*R)/100
Where, P is the Principal Amount
T is the Time Duration
R is the Rate of Interest
Amount(A) = Principal(P)+Interest(I)
The formula above is to calculate the Simple Interest on a yearly basis. To Calculate the Simple Interest when time duration is months the formula is as such
Simple Interest in Months = (P × n × R)/ (12 ×100)
Solved Examples of Calculating Simple Interest
1. Calculate the Simple Interest if the principal amount is Rs. 4000, the time period is 2 years and the rate is 5%. Also, calculate the total amount at the end of 2 years?
Solution:
Principal = Rs. 4000
Time Period= 2 Years
Rate of Interest = 5%
Simple Interest = (P*T*R)/100
= (4000*2*5)/100
= 400
Amount to be returned = Principal + Interest
= 4000+400
= 4400
2. Manoj Pays Rs. 8000 as an amount on the Sum of Rs. 5000 that he had borrowed for 2 years. Find the rate of interest?
Solution:
From the given data
Amount = Rs 8000
Principal = Rs 5000
SI = A – P = 8000 – 5000 = Rs 3000
T = 2 years
We need to find the Value of R
SI = (P × R ×T) / 100
R = (SI × 100) /(P× T)
R = (3000 × 100 /5000 × 2) =
Thus, R = 30%
Manoj Pays Rs. 8000 as an amount on the Sum of Rs. 5000 at a rate of 30% for 2 Years.