Solved examples on Simple Interest

A look into Solved examples on Simple interest for better clarity in calculation & application.

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......

Example 1:

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

Example 2:

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

Example 3:

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.

Example 4 :

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

Here are more examples of how to calculate simple interest:

Example 1:

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.

Example 2:

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.

Example 3:

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.

Example 4:

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

Example 5:

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

Example 6:

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

Example 7:

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

Example 8:

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

Example 9:

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

Example 10:

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

Example 11:

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

Example 12:

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...

Simple Interest (S.I)

Finding rate when Principal and time are given

Finding time when Principal and rate are given

Compound interest

Business Math

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