Eight Standard >> Simple interest | Part-1

Simple interest: Introduction

Interest:- It is the money paid for the privilege of using the creditor's money temporarily.
Creditor:- The organization or person who lends money.
Debtor:- The organization or person who borrows money from the creditor.

Factors of simple interest:

Principal:- The amount of loan that is borrowed or, given to a person or, the sum that is kept as a deposit with any organization. (such as bank etc)

Time period:- The period for which the loan is borrowed or given to a person.

Rate or rate percent:- The interest per Rs 100.00 at the end of 1 year.

Working formula to find simple interest:

S.I=simple interest
P= principal
R= rate of interest per annam (year)
T=Time period

S.I=\(\frac{P \times R \times T}{100}\)

(i) P=\(\frac{I \times 100}{R  \times T}\)
(ii) R=\(\frac{100I}{P \times T}\)

Illustration: A sum of money amount to Rs 6208 in 3 years at 8% simple interest per annum (year). Find the principal amount of sum.

Solution:
Let the principal=P = Rs \(x\)
T=Time period=3 years
R= rate of interest=8%=\(\frac{8}{100}\) 

\(\therefore\) simple interest=\(\frac{P \times R \times T}{100}\)
               =\(\frac{x \times 8 \times 3}{100}\)
               =\(\frac{24x}{100}\) 

Amount =Rs 6200=P+I
  \(\therefore\) 6200=x+\(\frac{24x}{100}\)
  \(\Rightarrow\) 6200 \(\times\) 100=100x+\(24x\)
  \(\Rightarrow\) 620000=\(124x\)
  \(\therefore\) \(x\)=\(\frac{620000}{124}\)=5000

\(\therefore\) The required sum =Rs 5000.