Simple Interest

Simple Interest and Compound Interest Difference


I need money. I don't have enough to meet my requirement. Then what should I Do?

Well I have 3 wonderful options. 

1. Robing a Bank : It needs Courage, Effort, Planning and Hard-work. Well I am sure that I don't have any of these. 
2. To kidnap you and ask your dad for money : Ummmm, not a good idea!!! Nexxxxxxxt
3. To borrow the money from my friend. Sounds good, isn't it? 

• But Nobody gonna give me money if Isay that I'm not going to return it to him. So, I should promise him that I will return the amount within a specif amount of time (not really :P). And in-order to TEMPT him, I also will promise him that I will return his money with some ADDITIONAL money. This additional money is called INTEREST. 
• There are TWO types of Interests are there

1. Simple Interest : The amount charged by the lender for giving you his money for a specific amount of time. 
2. Compound Interest : Here also same. But here the lender calculates the Interest on Interest if the given time exceeds (dont worry if you are unable to understand what I am saying. We shall discuss about this in our next post. Now concentrate on Simple Interest)

When money is borrowed at Simple Interest, the interest charged is same irrespective of the period involved.
       I mean, if Simple Interest for One year is Rs 1000/-, then for 2 Years with teh same rate percent, it will be 2X1000 = 2000/-

So, for 8 years it will be 8 X1000 = 8000.


So, if the Simple Interest (or SI in shorter form) on a certain sum is Rs 600 in 3 yrs, then the SI on that sum for one year will be 600/3 = 200

Now have a look at some formulas :

SI = (P*T*R)/100

   Where
SI=Simple Interest  
P= Principle (the actual money borrowed)
T=Time  in Years
R=Rate of % per annum (The percentage of the Principle, we should pay as the Interest)
So, Obviously

P = (100I) /TR
T = (100I) /PR
R = (100I) / PT
Now, how much money we should pay to the Lender?
Its the total of the money we have taken from him and the money we should pay in the name of Interest.

So, Amount A = P+I       The actual amount (Principle) + Interest


Now lets see some Examples

Simple Interest - Practice Problems

Here are some Simple Interest Practice Problems. Before Doing Problems, Have a look at the Basics HERE



1.  Find the Simple Interest on Rs 750 in 4 years at 15% per annum

   here S.I =  PTR/100
                 =  (750 X 4 X 15) / 100 =  450



2. On what sum of money will the Simple Interest be Rs. 2000 in 5 years at 8% Per Annum?

      here they are asking about P,

         So, P = 100I / TR
                  =  (100X2000) / 40  = 5000

3. A man invested Rs. 20,000 at 10% P.A. Rs. 15,000 at 12% P.A. and some money at 15% P.A. If the total annual interest recieved is Rs. 56,00, find the money invested by him at 15% P.A                                                                                            
     here, the total Interest he recieved is Rs. 56,00.
    So,  find the total interest and try to equate it with 56,00

    So, the total interest = Σ [ (PTR)/100 ]    [ here Sigma symbol ( Σ ) represents the Total]

                 = 200X10+150X12+ (P/100)X15 = 5600

                    3800+ (3P/20) = 5600

               = 3P/20  =  1800 => P = 12000/-


4. On a sum of money the rate of interest is 5% Per Annum for the first 3 years, 6% Per Annum for the next 4 years, and 8% Per Annum for the next years beyond the first 7 Years. If the interest obtained in 12 Years is Rs. 3,950, Find the Sum?

   5% X 3 + 6% X 4 + 8% X 5
            =  15% + 24% + 40% = 79%
                =>  (79/100) P  = 3950

                => P  =  (39500/79)  =  5000

5. A sum was put at 5% at a certain rate for 5 Years. Had it been put at 3% Per Annum higher rate, it would have fetched Rs. 900 more. Find the Sum?

  P =   100I / TR      [Note : Here I is Additional Interest and R is additional Rate]

          = (100 X 900) / (5X3)                  
             = 6000

6. On a certain Sum of Money the Simple Interest in 2 years at 10% P.A is Rs. 125, what would be the S.I if the rate of Interest will be 12% P.A in 3 Years?

Here the Principle is same for both the cases. I mean  p = P    

    =>    100i / tr  =  100I / TR

            =  125 / (2 x 10)  =  I / (3 x 12)

          = >  I = 225

7. The S.I on Rs 6400 at 12 1/2 % per annum is Rs. 2000. Find the Period ?

   T = 100I / PR   =  (100 X 2000 X 2) / (6400 X 25)  =  2 1/2 years


8. The S.I on Rs. 6000 in 3 Years and 4 Months is Rs. 3000. Find the rate percent Per Annum ?

    [ here T = 3 4/12 = 3 1/3  = 10/3 years]

          I = PTR / 100 =>  R = 100I / PT

           =>  (100 X 3000 X 3) / (6000 X 10 ) = 15

9. Manish took a loan of Rs. 4000 at S.I. After 2 Years he cleared the loan by paying Rs. 5600. Find the Rate % P.A?

       [ Here Manish took Rs. 4000 and Payed 5600. So the Interest will be 5600-4000 = 1600 ]

      So, R = 100I / PT

                    =  (100 X 1600) / (400 X 2)

                      =  20

10. A lent Rs. 25000 to B for 4 years and Rs. 40,000 to C for 3 1/2 years and got Rs. 24,000 S.I from both B and C. Find the rate PCPA 

     Σ [ (PTR)/100 ]   =  250 X 4R = 400 X (7/2) R =  2400R

                                       => R = 10