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How To Calculate Simple Interest – Formula, Examples & Shortcut To Find SI

How To Calculate Simple Interest

Before we discuss about How To Calculate Simple Interest, formula to calculate interest, examples and shortcuts to find SI, we must know what is simple interest. Simple interest is a type of interest that is invested without any other factors, for the loan amount or the entire period of the loan, such as past interest (payment or fees) or any other financial considerations.  Simple Interest applies to the money invested for the short term period.

SI is the short form of Simple interest and the rate of Simple interest plays a crucial role to calculate the amount of interest on the loan as well as investment. SI is generally expressed as a percentage. Simple interest is usually applies to short-term loans for a short period of time. Simple Interest is generally applies on a year or less, which are managed by commercial companies.

Calculate Simple Interest (Simple Interest Calculator)

Simple Interest Calculator

In this article we are guiding you about How To Calculate Simple Interest, easy short cuts to find Simple interest along with examples to Calculate Simple Interest and formulas etc. So, students who want to know complete details read this article by scrolling down the page which is well created by the dedicated team members of www.recruitmentinboxx.com

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How To Calculate Simple Interest

How to calculate Simple Interest (SI)?

Rate is the percentage of basic charge each year as interest. Rate is expressed as decimal fraction; therefore the percentage should be divided by 100. For example, if the rate is 15%, then use 15/100 or 0.15 in the formula. ‘Time’ is the time in years of the loan.

What is the formula to calculate simple interest?

Have a look on Formula to calculate simple interest (Simple Interest Formula)

Explanation: Simple interest (I) is calculated by multiplying Principal (p) times the Rate (r) times the number of Time (t) periods.

Example: You invest $100 (the principal) at a 5% annual rate for 1 year. …

5 divided by 100 = .05.

5 / 100 = .05.

  • What is Simple Interest?
  • The money borrowed is called the principal (P).
  • Extra money paid back is called the simple interest (S.I).
  • Interest is expressed as rate par cent per annum (p.a.) i.e., 12% per month means, the interest on $100 for 1 year is $12.
  • The total money paid back after the given time is called the amount.
  • Time for which money is borrowed is called the time period.

Read Out: How to Prepare Maths For Competitive Exams

Shortcut to Calculate Simple Interest (SI)

A) Find interest owed with formula (I=Prt).

  • I: Interest owed
  • P: Principal or the initial sum borrowed
  • R: Interest rate written as a decimal
  • T: Number of time periods since loan began

Find interest owed with formula (I=Prt)

B) Find total amount owed

The borrower also has to pay back initial loan, so total amount owed is equal to I+ P. You can either add them together at the end, or combine them into one equation to get total amount A=P (1+rt)

Find total amount owed

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Examples of Simple Interest

Example 1: Find simple interest on $2000 at 5% per annum for 3 years. Also, find the amount.

Solution:

Principal = $2000

Rate = 5% p.a.

T = 3 years

S.I = (P × R × T)/100

= (2000 × 5 × 3)/100

= $ 300

Amount = P + I

= $ ( 2000 + 300 )

= $ 2300

Example 2: Calculate the simple interest on $ 6400 at 10% p.a. for 9 months.

Solution:

P = $ 6400

R = 10% p.a.

T = 9 months or 9/12 years

[12 months = 1 year

1 months = 1/12 years

9 months = (1 × 9)/12 years]

Therefore, S.I. = (P × R × T)/100

= (6400 × 10 × 9)/(100 × 12)

= $480

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Example 3: Mike took a loan of $20000 from a bank on 4 February 2009 at the rate of 8% p.a. and paid back the same on 6th July 2009. Find the total amount paid by Mike.

P = $20000

R = 8 % p.a.

T = 152/365

Solution:

Time = February + March +April + May + Jun + July

= 24 days + 31 days + 30 days + 31 days + 30 days + 6 days

= 152 days

Therefore, S.I. = (P × R × T)/100

= (20000 × 8 × 152)/(100 × 365)

= $ (40 × 8 × 152)/73

= $ 666.30

Therefore, the amount paid = $ (20,000 + 666.30) = $ 20666.30

Example 4: At what per cent will $ 1500 amount to $ 2400 in 4 years?

Solution:

P = $ 1500

R = ?

T= 4 years and

A = $ 2400

S.I. = A – P

= $(2400 – 1500 )

= $ 900

S.I. = (P × R × T)/100

900 = (1500 × R × 4)/100

Therefore, R = (900 × 100)/(4 × 1500) = 15%

Read Out Difference between: Simple and Compound Interest

Example 5: In how much time will a sum of money triple itself at 15 % p.a.?

Solution:

Let P = x, then A = 3x

So, I = A – P

= 3x – x = 2x

We know that S.I = (P × R × T)/100
2x = (x × 15 × T)/100

T = (2x × 100)/(x × 15) = 40/3 = 13.3 years

Example 6: At what rate percent per annum simple interest will a sum of money double itself in 6 years?

Solution:

Let P = x, then A = 2x

Also, S.I = A – P

= 2x – x

= x

T = 6 years

We know that S.I. = (P × R × T)/100

(x × R × 6)/100 = x

R = 100x/6x = 16.6 %

Also Get Here: Problems on Compound Interest

Important Note:

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