Simple Interest

QUANTATIVE APPTITUDE

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Simple Interest

Definition
 Interest: Interest is the amount to be paid on the borrowed money or the amount received on the
money lent.

 Principal: The borrowed money or the lent money is called Principal.

 Amount: The sum of the interest and the principal is called an Amount.

 Interest Rate: The rate at which the interest is charged on the principal is called Rate of Interest.

 Time: The period for which the money is borrowed or deposited is called Time.

Symbols
 For Simple Interest: S.I

 For Compound Interest: C.I

 For Time period: T

 For Principal: P

 For Amount: A

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Classifications
1. Simple Interest

2. Compound Interest

What is called Simple Interest?

When the interest is calculated only on the Principal for every year, it is called Simple Interest.

What is called Compound Interest?

It is the interest paid on the original principal amount and the accumulated past interest.

Basic Formula of Simple interest

Simple interest = (Principal × Rate of interest × Time)/100

Amount = Simple interest + Principal

Examples:
Q1. Find the amount after 3 years if the rate of simple interest is 15% per annum and the principal is Rs.
2400.

Sol:

S.I = PRT/100

⇒ Rs. (2400 × 15 × 3)/100

⇒ Rs. 24 × 45

⇒ Rs. 1080

Amount = Rs. (2400 + 1080)

⇒ Rs. 3480

⇒ the amount after 3 years is Rs. 3480

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Q2. Find simple Interest on Rs. 3000 at 15% per annum for 8 months.

Sol:

According to the formula

⇒ [Rs. 3000 × 15 × (8/12)]/100

⇒ (Rs. 30000)/100

⇒ Rs. 300

⇒ The Simple Interest is Rs. 300.

Q3. A sum of money amounts to Rs.756 in 2 years and Rs.873 in 3.5 years. Find the principal

Sol:

Let the principal be P

In 2 years it amounts to Rs.756

In 1.5 years it amounts to Rs.873

Interest = 873 - 756

⇒ Interest = 117

⇒ 1.5 yrs → 117

⇒ 1 yr → 78

⇒ 2 yr → 156

Principal + interest = Amount

⇒ P + 156 = 756

⇒ P = 756 - 156

⇒ P = Rs.600

Q4. In how many years shall Rs. 7,000 invested at the rate of 20% simple interest per annum, amount to Rs.
9,000?

Sol:

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SI = 9,000 – 7,000

⇒ SI = Rs. 2,000

According to the formula,

⇒ 2,000 = (7,000 × 20 × T)/100

⇒ 2,00,000 = 7,000 × 20 × T

⇒ T = 2,00,000/1,40,000

⇒ T = 10/7

⇒ required time is 10/7 years.

Q5. Arjun invests Rs 5500 on simple interest for 3 years and earns Rs 1815 as interest. Find the rate of
investment.

Sol:

1815 = (5500 × 3 × r)/100

⇒ (1815 × 100)/(5500 × 3) = r

⇒ 11% = r

⇒ Rate is 11% per annum.

Problems based on a certain amount become x times of principal after

y years.
Example:

Certain sum becomes 4 times of itself in 6 years at simple interest. In how many years will it become 9 times
of itself?

Sol:

Let the sum be ₹ P

The amount will be ₹ 4P

Let the rate of interest be R%

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And the time to become 9 times of itself is T years.

So, Simple interest will become = 4P - P = ₹ 3P

Simple interest (S.I) = (P × R × t)/100

⇒ 3P = (P × R × 6)100

⇒ R = 300/6 = 50%

In the question, asked for 9 times the principal

So, interest will 8P in T years

⇒ 8P = (P × 50 × T)/100

⇒ T = 800/50 = 16 years

∴ The sum will take 16 years to become 9 times of itself.

Short trick:

In 6 years simple interest is 3P

We need to find time for 8P

⇒ 3P = 6

⇒ 8P = 6 × (8/3)

⇒ 8P = 16

∴ The sum will take 16 years to become 9 times of itself.

If rate being increased based problems

Example:

A sum of Rs. 6,000 amounts to Rs. 7,800 in 4 years at simple interest. If the interest rate is increased by
2.5%, then the same sum in same time would amount to:

Sol:

Amount after 4 years,

⇒ P + (4PR)/100 = 7800

⇒ 6000 + (6000 × 4 × R)/100 = 7800

⇒ R = 7.5%
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New interest rate = old interest + 2.5% = 7.5% + 2.5% = 10%

New amount obtained after 4 years at 10% rate = P + 4P × 10/100

New amount = 6000 + 4 × 6000 × 10/100 = Rs 8,400

∴ The new amount at an increased rate of interest is Rs 8400.

Father dividing amount between two sons or daughters

Example:

Q. A father left a will of Rs. 5 lakhs between his two daughters aged 10 and 15 such that they may get equal
amounts when each of them reach the age of 21 years. The original amount of Rs. 5 lakhs has been
instructed to be invested at 10% p.a. simple interest. How much did the elder daughter get at the time of
the will?

Sol:

Let Rs. x be the amount that the elder daughter got at the time of the will.

∴ The younger daughter got (5,00,000 - x).

The elder daughter’s money earns interest for (21 - 15) = 6

Time = 6 years

Rate% = 10%p.a.

The younger daughter’s money earns interest for (21 - 10) = 11

Time = 11years

Rate% = 10%p.a.

As the sum of money that each of the daughters get when they are 21 is the same,

⇒ x + (6 × 10 × x / 100) = (5,00,000 - x) + (11 × 10 × [5,00,000 - x] / 100)

⇒ 100x + 60x = (5,00,000 - x) + (55,000,000 - 110x)

⇒ 160x = 55,500,000 - 111x

⇒ 271x = 55,500,000

⇒ x = 204797

∴ the required value is 204797

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