Simple interest is a method of calculating interest on a loan or investment. It is calculated as a percentage of the principal amount, which is the original amount, borrowed or invested. The formula for calculating simple interest is:
Simple Interest = (Principal * Rate * Time)
Where:
Principal is the original amount borrowed or invested
Rate is the interest rate expressed as a percentage
Time is the duration of the loan or investment in years
Let's look into Solved examples on Simple interest......
Ariel takes a loan of $8,000 to buy
a used truck at the rate of 9% simple Interest. Calculate the annual interest
to be paid for the loan amount.
Solution: From the details given in the problem,
Principle: P = $8,000 and R = 9%
or 0.09 expressed as a decimal.
As the annual Interest is to be calculated, the
time period T = 1
Plugging these values in the simple Interest formula :
I = P x R x T
= 8,000 x 0.09 x 1
= 720
Annual Interest to be paid = $720
Steve invested $ 10,000 in a savings bank account that earned
2% simple interest. Find the interest earned if the amount was kept in the bank
for 4 years.
Solution: Principle
P = 10,000 Time Period T= 4 years & Rate of Interest = 2% =0.02
I = PRT
I = 1000 x 0.02 x 4
I = $800
Interest earned for the investment = $ 800
Ryan bought $15,000 from a bank to buy a car at simple interest of 10%
He repaid $9,000 as interest while clearing the loan, find the time for which the loan was given.
Solution: Principle = $15,000
Rate of Interest R =10% =0.10, Interest paid =
9,000. And T is time to be found.
T = I/(PR)
= 9000/(15,000 x 0.10)
T = 6 years.
The loan was given for 6 years.
How much time will the simple interest on $3,500 at the rate of 9% will be the same as simple interest on $4,000 at the rate of 10.5% per annum for 4 years?
Solution : Simple interest on 4,000 at rate10.5%
I = PxTxR
I= 4000 x 4 x 0.105
I = $1,680
The interest of $1,680 is the same as that on $3,500 at 9%
p.a for suppose 't' years
S.I
Time = t = ------------
P x R
1680
Time = t = ------------
3500 x 0.09
1680
Time = t = ------------
315
Time = t = 5.33 years
John borrows $10,000 from a bank at a simple interest rate of 5% per annum for a period of 3 years. What is the total amount of interest he has to pay?
Solution: Principal = $10,000, Rate = 5%= 0.05,
Time = 3 years
I = (10,000 * 0.05 * 3)
I = $1,500
Therefore, John has to pay a total interest of $1,500.
Samantha invests $5,000 in a fixed deposit at a bank for a period of 2 years at a simple interest rate of 3% per annum. What is the total amount of interest she will earn?
Solution: Principal = $5,000, Rate = 3% = 0.03, Time = 2 years
I = prt
I = (5,000 * 0.03 * 2)
I = $300
Therefore, Samantha will earn a total interest of $300.
Mark borrows $8,000 from a friend at a simple interest rate of 2.5% per month for a period of 6 months. What is the total amount of interest he has to pay?
Solution: Principal = $8,000, Rate = 2.5%= 0.025, Time = 6 months
First, we need to convert the monthly interest rate to an annual rate:
2.5% per month = 2.5 * 12 = 30% per annum
I= prt
I = (8,000 * 0.30 * 6)
I = $14,400
Therefore, Mark has to pay a total interest of $14,400.
If you borrow $5,000 at a simple interest rate of 6% per annum for 2 years, how much interest will you pay?
Solution:
I= prt
I = (5,000 x 0.06 x 2)
I = $600
If you invest $10,000 at a simple interest rate of 3% per annum for 5 years, how much interest will you earn?
Solution:
I = prt
I = (10,000 x 0.03 x 5)
I = $1,500
If you borrow $2,500 at a simple interest rate of 8% per annum for 1 year, how much interest will you pay?
Solution:
I = prt
I = (2,500 x 0.08 x 1)
I = $200
If you invest $7,500 at a simple interest rate of 2.5% per annum for 3 years, how much interest will you earn?
Solution: I = prt
I = (7,500 x 0.025 x 3)
I = $562.50
If you borrow $15,000 at a simple interest rate of 4.5% per annum for 4 years, how much interest will you pay?
Solution:I = prt
I = (15,000 x 0.045 x 4)
I = $2,700
If you invest $20,000 at a simple interest rate of 2% per annum for 7 years, how much interest will you earn?
Solution: Simple Interest = prt
I =(20,000 x 0.02 x 7)
I = $2,800
If you invest $12,500 at a simple interest rate of 1.8% per annum for 2 years, how much interest will you earn?
Solution: Simple Interest =prt
I =(12,500 x 0.018 x 2)
I = $450
If you borrow $8,000 at a simple interest rate of 7% per annum for 3 years, how much interest will you pay?
Solution: Simple Interest = prt
I=(8,000 x 0.07 x 3)
I= $1,680
If you invest $30,000 at a simple interest rate of 4% per annum for 5 years, how much interest will you earn?
Solution: Simple Interest = prt
I = (30,000 x0.04 x 5)
I = $6,000
To know more about Simple Interest, Compound Interest and its applications, please go through the below links...
Finding rate when Principal and time are given