SIMPLE INTEREST

Simple Interest Shortcut Methods

When a person borrows some money from another person then the borrower has to pay some extra money for the use of that money to the lender. This extra money is called Interest.

In other words, the amount charged by lender for giving his money for a specific amount of time is called Interest.

The amount of money borrowed is known as Principle.

Total of Interest and Principle is known as Total Amount.

Amount = Principle + Interest.

The borrower has to pay interest according to some percent of principle for the fixed period of time. This percentage is known as Interest Rate. This fixed period may be a year, six months, three months or a month and correspondingly the rate of interest is charged annually, half yearly, quarterly or monthly.

For example, the rate of interest is 10% per annum means the interest payable on Rs 100 for one year is Rs 10.

Some Basic Formulas

If A = Amount

P = Principle

I = Interest

T = Time in years

R = Interest Rate Per Year, then

Amount = Principle + Interest

A = P + I

EXAMPLE:

1. Find the simple interest on Rs 7000 at 50/3 % for 9 months?

Answer:

S.I. = P \times T \timesR 100

So, by putting the values in the above formula, our result will be.

Required result = 7000 \times 50 \times 9 3 \times 12 \times 100 = 875

2. Find the simple interest on the Rs. 2000 at 25/4% per annum for the period from 4th Feb 2005 to 18th April 2005?

Answer:

One thing which is tricky in this question is to calculate the number of days.
Always remember that the day on which money is deposited is not counted while the day on which money is withdrawn is counted.
So lets calculate the number of days now,
Time = (24+31+18) days = 73/365 years = 1/5 years
P = 2000
R = 25/4%

$S.I. = = 2000 \times 25 4 \times 5 \times 100 = 25$