It is the sum which is paid by the borrower to the lender for
using the money for a specific time period. The money borrowed is called the
Principal. The rate at which the interest is calculated on the principal is
called Rate of Interest. The time for which the money is borrowed is Time and
the total sum of principal and interest is called the Amount.
If P = Principal, R = Rate per cent per annum T = Number of years, SI =
Simple Interest and A = Amount. Then,
Here, the interest is calculated on the original principal ie,
the principal to calculate the interest remains constant throughout the time
period. The interest earned on the principal is not taken into account for the
purpose of calculating interest for later years.
Example 1: Find the SI on Rs. 7200 at 8% per annum for 10 months.
Example 3: Three persons separately borrow Rs. 51000
in all froma banker at 10% and returned with interest after 2, 5 and 6 year
respectively. It the returned amounts are equal, what are the sums borrowed by
each of them?
Example 4: What annual instalment will discharge a debt of Rs. 600 due
in 3 year at 10% per annum simple interest?
Solution. Let each instalment be Rs. x.
Clearly, first instalment will be paid after 1 year. Thismoney will be with the
lender for 2 year. Similarly, he will have Rs. x for 1 year and Rs. x at the
(amount of Rs. x for 2 year) + (amount of Rs. x for 1 year Rs. x) = 6600