Simple Interest –
When money is borrowed on simple interest, then the interest is calculated uniformly on the original principal throughout the loan period. The money borrowed or lent out for a certain period is called the principal or the sum. Extra money paid for using others' money is called interest. The sum of principal and interest after a specified period is called the amount. Interest on $100 for 1 year is called the rate percent per annum. The period for which money is borrowed is called the time.
Principal = P, Rate = R % per annum and Time = T years,
P X R X T
then simple interest (S.I) = -------------
100
Example.1) Find the simple interest on $ 15000 for 3 years at 10% per annum.
Ans.) Given, Principal (P) = $ 15000, Rate (R) = 10 % per annum and Time (T) = 3 years,
P X R X T 15000 X 10 X 3
Then simple interest (S.I) = ------------ = -----------------
100 100
= $ 4500
So, the obtained simple interest is $ 4500 (Ans.)
Example.2) Find the amount and the simple interest on $ 20000 for 5 years at 15% per annum.
Ans.) Given, Principal (P) = $ 20000, Rate (R) = 15 % per annum and Time (T) = 5 years,
P X R X T 20000 X 15 X 5
Then simple interest (S.I) = -------------- = -----------------
100 100
= $ 15000
Amount or sum = $ ( 20000 + 15000 ) = $ 35000
So, the obtained simple interest (S.I) is $ 15000 and amount (A) is $ 35000 (Ans.)