Page 98 - Maths Skills - 7
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96 Maths
SIMPLE INTEREST
Borrowing or lending of money is done by the banks or a money lender with some interest known as simple
interest for a specified period of time. Let us learn the terms related to simple Interest.
(i) Principal: The money borrowed is called the principal or the sum denoted by ‘P’.
(ii) Simple Interest: The additional amount paid by the borrower to the lender is called the interest. It is
denoted by S.I.
(iii) Amount: The total money paid by the borrower is called the amount i.e.,
Amount = Principal + Simple Interest
or A = P + S.I.
(iv) Time: The period for which the money is borrowed or deposited is called the time denoted by ‘T’.
(v) Rate: The interest on ` 100 for 1 year is known as the rate per cent per annum and is denoted by ‘R’.
The interest could be of two types Simple Interest and Compound Interest. Here we will focus on simple
interest only, i.e., the interest which is calculated uniformly on the original principal throughout the loan period.
Let’s Attempt
Example 1: A man borrowed ` 5500 from a bank at 12% per annum on 30th May, 2020. How much money did
he give to the bank to settle the account on 11th August, 2020?
[Hint: While counting the number of days, the deposited day is ignored but we count the day of
withdrawal and consider 365 days a year.]
Solution: Here time is calculated as under: Fact-o-meter
Number of days of May = 1 � S.I. = P × R × T
Number of days of June = 30 100
Number of days of July = 31 � R = 100 × S.I
P × T
Number of days of August = 11 S.I. × 100
Total number of days = 73 � P = R × T
1
Time = 73 days = 73 years or years. 100 × S.I.
365 5 � T = P × R
1
P = ` 5500, R = 12% per annum and T = years. � A = P + S.I. or S.I. = A – P
5
Since S.I. = P × R × T = 5500 × 12 × 1 = ` 132
100 100 × 5
Amount (A) = P + S.I. = ` 5500 + ` 132 = ` 5632
Hence, he will have to pay ` 5632 to the bank to settle the account.
Example 2: At what rate will ` 2500 fetch an interest of ` 300 in 4 years?
Solution: Here, P = ` 2500, S.I. = ` 300 and T = 4 years.
P × R × T
We know that, S.I. =
100
\ R = S.I. × 100 = 300 × 100 = 3% per annum
P × T 2500 × 4
Hence, ` 2500 will fetch an interest of ` 300 in 4 years at the rate 3% per annum.
