{"id":7521,"date":"2022-03-28T12:52:25","date_gmt":"2022-03-28T07:22:25","guid":{"rendered":"https:\/\/www.goseeko.com\/blog\/?p=7521"},"modified":"2022-04-13T12:06:59","modified_gmt":"2022-04-13T06:36:59","slug":"what-is-simple-interest-2","status":"publish","type":"post","link":"https:\/\/www.goseeko.com\/blog\/what-is-simple-interest-2\/","title":{"rendered":"What is simple interest?"},"content":{"rendered":"\n

Simple interest<\/a><\/h2>\n\n\n\n

We can lent or borrow money from one entity to another. The price to be paid for the use of a certain amount of money for a certain period of time is known as interest.<\/p>\n\n\n\n

The money we borrow or lent is called principal. The interest may be payable yearly, half-yearly, quarterly or monthly. Calculation of interest is one of the most basic uses of mathematics in finance.<\/p>\n\n\n\n

We can define the SI as- \u201cthe price has to be paid for the use of a certain amount of money or principal for certain period, is called interest\u201d<\/p>\n\n\n\n

Amount<\/a><\/strong><\/h2>\n\n\n\n

This is the sum of the principal and the interest at any time.<\/p>\n\n\n\n

We denote the rate of interest by \u2018i\u2019.<\/p>\n\n\n\n

Let the principal is 100 Rs. and the interest is 8 then we can say that the rate of interest is 8 percent per annum or we can write it as r = 8%<\/p>\n\n\n\n

Suppose \u2018P\u2019 is the principal and \u2018n\u2019 is the time for which the principal is given and \u2018r\u2019 be the rate of interest per annum<\/p>\n\n\n\n

\u2018I\u2019 be the amount of interest<\/p>\n\n\n\n

And \u2018i\u2019 be the rate of interest per unit<\/p>\n\n\n\n

Then-<\/p>\n\n\n\n

I = P.r.t<\/p>\n\n\n\n

SI <\/strong>= Principal <\/strong>\u00d7Rate <\/strong>\u00d7Time<\/strong><\/p>\n\n\n\n

Where<\/p>\n\n\n\n

I<\/strong>: <\/strong>Interest, the amount of money that you pay to borrow money or the amount of money that you earn on a deposit.<\/p>\n\n\n\n

P<\/strong>: <\/strong>Principal which is the original sum of money<\/p>\n\n\n\n

t<\/strong>: <\/strong>Time duration for which the money is borrowed\/ deposited.<\/p>\n\n\n\n

r<\/strong>: <\/strong>Rate of interest which is usually expressed as percent that is paid for money borrowed, or earned for money deposited.<\/p>\n\n\n\n

We can calculate the amount as below,<\/p>\n\n\n\n

Amount = P + I = P(1 + rt)<\/p>\n\n\n\n

Solved examples<\/h2>\n\n\n\n

Example: Sushmita invested 5000rs. At the rate of 8 per cent per annum then what will be the value of the amount she invested in 5 years.<\/strong><\/p>\n\n\n\n

Sol:<\/strong><\/p>\n\n\n\n

Here P = 5000, r = 8\/100 = 0.08, t = 5, so that <\/p>\n\n\n\n

Amount = P + I = P(1 + rt) <\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Hence the required amount is – 7000<\/p>\n\n\n\n

Example: Find out the <\/strong>SI on 5600 rs. At 12 percent per annum from July 15 to September 26, 2020.<\/strong><\/p>\n\n\n\n

Sol:<\/strong><\/p>\n\n\n\n

Here we calculate the time, so that it will be<\/p>\n\n\n\n

Total days from July 15 to sept 26 = 73 days or 73\/365 = 1\/5 years<\/p>\n\n\n\n

And P = 5600, r = 12\/100 = 0.12 SI = P.r.t. = 5600 * 0.12 * 1\/5 = 134.4<\/p>\n\n\n\n

Hence the simple interest is \u2013 134.40<\/p>\n\n\n\n

Example: Harpreet invests 1200rs. At 10 percent per annum for some time and it becomes 1560 then find the principal when that will become 2232 at 8 percent p.a. in the same time.<\/strong><\/p>\n\n\n\n

Sol:<\/strong><\/p>\n\n\n\n

Here in first situation- P = 1200, A = 1560 and r = 0.10<\/p>\n\n\n\n

So that,<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

In second situation-<\/p>\n\n\n\n

A = 2232, t = 3, r = 0.08<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

so that, P = 1800<\/p>\n\n\n\n

Example: To buy a new truck, Jack borrowed Rs. 5,00,000 at 8% annual <\/strong>SI for 3 years. How much interest will he pay?<\/strong><\/p>\n\n\n\n

Sol:<\/p>\n\n\n\n

Here, P = 5,00,000, r = 8\/100=0.08, t = 3 years, I =?<\/p>\n\n\n\n

Using the formula I = P \u00d7 r \u00d7 t,<\/p>\n\n\n\n

SI (I) = 500000 \u00d7 0.08 \u00d7 3<\/p>\n\n\n\n

= Rs. 1,20,000.<\/p>\n\n\n\n

Therefore, Jack will pay Rs. 1,20,000 as interest for the truck loan.<\/p>\n\n\n\n

Example: In how many years will a sum be double of itself at 5% p.a. <\/strong>SI?<\/strong><\/p>\n\n\n\n

Sol:<\/strong><\/p>\n\n\n\n

Amount = 2 \u00d7 Principal<\/p>\n\n\n\n

Given r = 0.05, t=?<\/p>\n\n\n\n

From A = P + P\u00d7r\u00d7t, so that<\/p>\n\n\n\n

A = P (1 + rt).<\/p>\n\n\n\n

According to question, 2P = P [1 + t(0.05)]<\/p>\n\n\n\n

or, 2 = 1 + t (0.05)<\/p>\n\n\n\n

t = 1\/0.05 = 20.<\/p>\n\n\n\n

Therefore, a sum will be double of itself at 5% p.a. SI in 20 years.

<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

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