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Principal
Borrowed money is called Principal.Time Period
Period of time for which money is borrowed is called time period.Interest
Borrowed money has to be returned at the end of time period with some extra money. This extra money is called Interest.Rate of interest
Interest is charged as some percentage of Principal for a period of time. When the rate is charged yearly it is called rate per annum.e.g., 10% per annum, which means 10% of the principal will be charged as interest per year for given time period.
Amount
Sum of Principal and Interest to be returned after the given period of time is called Amount.Interest for one year
➣ Money is borrowed for one year of time period.➣ Interest = R% of P, where R= rate of interest and P =Principal
➣ Interest = R/100×P = P×R/100
➣ Q) Rs 10,000 is invested at 5% interest rate p.a. Find the interest at the end of one year.
A) P = Rs 10,000
R = 5% p.a.
Interest at the end of year = R % of P = P×R/100= 100
Interest for multiple years
Money is borrowed for more than one year of time period .SIMPLE INTEREST
Interest is calculated for every year on the same Principal and added at the end of the time period, this sum is called Simple Interest (SI).➣ SI for one year = P×R/100
➣ SI for two year = P×R/100 + P×R/100 = 2P×R/100
➣ SI for T year = P×R/100 + P×R/100 +............T times = P×R×T/100
➣ Amount (A) payable after T year = P + SI
SI = P×R×T
100
A = P + ITry These
(Q1) Rs 3,500 is given at 7% p.a. rate of interest. Find the interest which will be received at the end of two years(Q2). Rs 6,000 is borrowed at 6 % rate of interest p.a.. Find the interest and the amount to be paid at the end of 3 years.
(Q3). You have Rs 2,400 in your account and the interest rate is 5%. After how many years would you earn Rs 240 as interest.
(Q4). On a certain sum the interest paid after 3 years is Rs 450 at 5% rate of interest per annum. Find the sum.
(A1) P = 3,500
R = 7% p.a.
T = 2 years
∴ SI = P×R×T/100 = 35
(A2) P = 6,000
R = 6% p.a.
T = 3 years
∴ SI = P×R×T/100 = 60
(A3) P = 2,400
R = 5% p.a.
SI = Rs 240
T = ?
∵ SI = P×R×T/100
⇒ 240= 24
⇒ 240 = 24×5×T
⇒ 24×5×T = 240
⇒ T = 240/24×5 = 2 years
∴ After 2 years we would earn Rs 240 as interest.
(A4) P = ?
R = 5% p.a.
SI = Rs 450
T = 3
∵ SI = P×R×T/100
⇒ 450 = P×5×3/100
⇒ 450×100 = 15×P
⇒ 15×P = 450×100
⇒ P = 45000/15 = 3000
∴ The sum borrowed = Rs 3000
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