There is nothing free in this world and borrowing money against it is no exception. When you borrow a certain amount of money from any individual or an organization, you not only repay them back the borrowed amount but also the interest along with it. The interest or simple interest is an amount that is calculated based on the borrowed sum (principal amount) for a particular period of time at a specific rate of interest. When it comes to competitive exams, the simple and compound interest questions are some of the most prevalent and important ones out of all the topics in the syllabus. Therefore, it is pivotal for the candidates to have an exact idea about different types of simple interest questions along with the formulae you need to remember.
Concept and Formulas of Simple Interest
Simple interest is one way that is used to calculate the amount due at the end of a particular time period, which is to be repaid along with the principal sum. Calculating the simple interest involves three main elements, Principal (P), Time Period (T), and Rate of Interest (R). Let us have a brief discussion about all these three elements that you need to be aware of while solving simple interest questions.
- Principal (P): Principal or the Capital is the main amount of money that is to be borrowed/loaned/deposited.
- Time Period (T): Time period signifies the total duration for which the money is borrowed.
- Rate of Interest (R): It is the percentage of interest which is calculated on the principal amount to be repaid along with the borrowed sum.
Talking about the formulae, calculating simple interest questions using is not that tough as it seems to be. Given below are the important formulae you should know about.
Formula 1: For calculating the Simple Interest on a given amount, we multiply the Principal amount (P) with Rate of Interest (R) and Time duration (T). The product of the three elements, P, R and T is then divided by 100. This is how we calculate SI in Simple Interest questions. The formula can be written as:
SI = [P x R x T] / 100
Formula 2: The candidates often face such types of simple interest questions where they have to calculate the total amount to be repaid including the principal and the interest amount. For calculating the Amount (A), all you need to do is simply add the principal amount to the above-mentioned formula for Simple Interest. Below is the mathematical representation of the formula:
A = P + [(P x R x T) / 100]
A = P + SI
Important Simple Interest Questions
“Practice makes a man perfect.” Now that you are completely aware of the basic simple interest formulae, it won’t be as tough for you to solve some basic and important simple interest questions that often mark their places in various competitive exams. Let us provide you with some solved questions, followed by a list of other unsolved practice questions so that you will be able to practice them effectively.
Simple Interest Questions 1: Aakriti borrowed a sum of Rs. 40,000/- from Ritu for 3 years at a rate of 4.5 % per annum. Find the interest amount that Ritu will earn after 3 years.
In order to calculate the interest amount of the given amount at the given rate for 3 years, we will be adhering to Formula 1.
SI = [P x R x T] / 100
SI = [40,000 x 4.5 x 3] /100
SI = 5,400
Therefore, Aakriti will have to pay an interest amount of Rs. 5,400 to Ritu at the end of 3 years.
Simple Interest Questions 2: Shrawni borrowed an amount of Rs. 15000/- from Nitika at the rate of 24 % SI for a time period of 6 years. Find the total debt Shrawni has to repay.
Using Formula 1, we will calculate the interest on the principal amount.
SI = [P x R x T] / 100
SI = [15000 x 24 x 6] / 100
SI = Rs. 21,600
Now that we have got the interest amount, we will calculate the total debt or Amount (A) using Formula 2, that is,
A = P + [(P x R x T) / 100], or
A = P + SI
A = 15000 + 21,600
A = 36,600
Simple Interest Question 3: Jennifer borrowed a particular sum of money at the interest rate of 6% per annum for the first 2 years. The borrowed the money at 9% per annum for the next 3 years and for the further 5 years, the interest rate turns out to be 14% per annum. If the total interest amount she paid is Rs. 11,400, then what is the Principal amount that she had borrowed?
Solution: To calculate the Principle amount, let us divide the question into 3 parts for you to understand easily.
Let Principle amount be P, then
- For the first 2 years = 6 % per annum
- For the next 3 years = 9 % per annum
- For the next 5 years = 14 % per annum
In this simple interest question, we are already given the interest amount of Rs. 11,400. So we can write the formula of SI in the following way:[P x 6 x 2] / 100 + [P x 9 x 3] / 100 + [P x 14 x 4] / 100 = 11,400
[95 x P] / 100 = 11,400
P = Rs. 12,000
Therefore, Jennifer borrowed a total amount of Rs. 12,000.
Other important simple interest questions you can practice are listed below:
- A sum of money amounts to Rs. 9800 after a time duration of 5 years and Rs. 12005 after a period of 8 years at the same rate of interest. Find the rate of interest.
- The SI on a specific amount of money at 12% per annum for 2.5 years is Rs. 40 less than the SI on the same amount for 3.5 years at 10% per annum. Determine the Principal sum of money.
- Kittu took a loan of Rs. 3,000 from a bank for 2 years at a rate of 12% per annum. Find the interest amount to be paid after two years.
- On a deposit of Rs. 10,000, what would be the annual accrued interest in a bank that pays 4% per annum of Simple Interest?
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8000 for 15 months at a monthly rate of 6 paise per rupee. The interest rate and the duration are indicated here in terms of months. The simple interest is therefore Rs. 7200.
Fixed interest, variable interest, annual percentage rate, prime interest rate, discounted interest rate, simple interest, and compound interest are the most common types of interest.
The older Middle English word was interesse (late 14c.), which was derived from Medieval Latin interesse (“compensation for loss”) and Anglo-French interesse (“what one has a legal concern in”) (compare German Interesse, from the same Medieval Latin source)
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