Simple interest is a key term if we discuss bank-related work such as home loan, car loan, education loan, etc.

But before we go ahead we need to discuss some terms which we used during finding the simple interest.

## Let's discuss the various definition-

## PRINCIPAL

The principal is that money which we borrowed from the market or from any person to fulfill our needs.

__Example of Principal__

*(Principal)*to purchase a new laptop.

- I pay 500 dollars interest on 10,000 dollars

*(Principal)*of loan.

## TIME

For how much duration we keep the borrowed money(Principal)is known as time.

__Example of Time__

*(Time)*.

*(Time)*.

## RATE

The quantity of percentage(Rate)of borrowed money is known as the rate of interest.

__Example of Rate__

## AMOUNT

The amount is the sum of principal(borrowed money)and simple interest(extra money).

__Example of Amount__

*(principal*) and pay interest 2,000$

*(Simple Interest)*for 2 years

*(Time).*So the total cost of the home will be 22,000$

*(Amount)*.

## SIMPLE INTEREST

Simple Interest is extra money that we pay on borrowed money.

The extra charge which we pay for use of Principal(Borrowed money).

__Simple Interest example__

*(S.I.)*on borrowed money.

__What is the formula to calculate simple interest?__

### 1. Formula to find the yearly Simple Interest -

Simple Interest = (Principal×Rate×Time)÷(100)OrS.I. = (P×R×T)÷(100)

### 2. Formula to find the monthly Simple Interest -

Simple Interest = (Principal×Rate×Time)÷(12×100)OrS.I. = (P×R×T)÷(12×100)

#### 3. Formula to find the daily Simple Interest -

Simple Interest = (Principal×Rate×Time)÷(365×100)OrS.I. = (P×R×T)÷(365×100)

# How simple interest is calculated?

Simple Interest(S.I.) is calculated with the help of a S.I. formula. It is very helpful to find S.I. for car loans, home loans, monthly, daily, etc.

### Q-1 Find the simple interest if a man takes a loan of 10,000 dollars for their car for 2 years at the rate of 5% per annum.

Solve:-

Principal = 10,000 dollars, Time = 2 years, Rate = 5% p. a.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (10,000×5×2)÷100

S.I. = 100,000÷100

S.I. = 1000 dollars.

So, we get simple interest for their car loan = 1000 dollars.

### Q-2 If John purchases a car of 100,000 dollars and after taking a loan if the bank takes the interest at the rate of 8% p. a. for 3 years. So find its simple interest.

Solve:-

Principal = 100,000 dollars, Time = 3 years, Rate = 8% p. a.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (100,000×8×3)÷100

S.I. = 2,400,000÷100

S.I. = 24,000 dollars.

Finally, we get simple interest for their car loan = 24,000 dollars.

## 2.) How simple interest is calculated on a home loan?

### Q-1 If Donald takes a home loan for their house at the rate of 9% per annum. Calculate their interest for 3 years. If he gets 20,000 dollars for their loan.

Solve:-

Principal = 20,000 dollars, Time = 3 years, Rate = 9% p. a.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (20,000×9×3)÷100

S.I. = 540,000÷100

S.I. = 5,400 dollars.

Donald will pay 5,400 dollars as interest for their home for three years.

### Q-2 Bank issue a loan of 2,000,000 dollars for the new bungalow of Mrs Sophia. How much interest she will pay for 5 years if the bank takes 10% as the rate of interest per annum.

Solve:-

Principal = 2,000,000 dollars, Time = 5 years, Rate = 10%.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (2,000,000×10×5)÷100

S.I. = 100,000,000÷100

S.I. = 1,000,000 dollars.

Sophia will pay 1,000,000$ on their home loan.

**3.) How to calculate simple interest per annum?**

### Q-1 35,000 dollars is invested at a 5 % rate per annum. Find the interest at the end of one year.

Solve:-

Principal = 35,000 dollars, Time = 1 year, Rate = 5% per annum.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (35,000×5×1)÷100

S.I. = 175,000/100

S.I. = 1,750 dollars.

Simple interest at the end of the year = 1,750 dollars.

### Q-2 James takes a loan of 500,000 dollars at 15% per year as a rate of interest. Find the interest for a year.

Solve:-

Principal = 500,000 dollars, Time = 1 year, Rate = 15% p. a.

Simple Interest = (Principal×Rate×Time)÷100

S.I. = (500,000×15×1)÷100

S.I. = 7,500,000÷100

S.I. = 75,000 dollars.

James will pay interest for a year = 75,000 dollars.

**4.) How to calculate simple interest per month****?**

For monthly simple interest, we will divide by 12 to the formula of S.I.Simple Interest = (Principal×Rate×Time)÷(12×100)

### Q-1 Rita purchases an electric scooter of cost 12,000 dollars for her father. He takes a loan for it at the rate of 7% for 1 year. So find its simple interest for a month.

Solve:-

Principal = 12,000 dollars, Time = 1 year, Rate = 7% p. a.

Simple Interest = (Principal×Rate×Time)÷(12×100)

S.I. = (12,000×7×1)÷(12×100)

S.I. = 84,000/1200

S.I. = 70 dollars.

The monthly simple interest for their loan will be 70 dollars.

### Q-2 Cost of a laptop is 8,000 dollars. So find its monthly interest at the of 4% per annum for 1 year.

Solve:-

Principal = 8,000 dollars, Time = 1 year, Rate = 4% p. a.

Simple Interest = (Principal×Rate×Time)÷(12×100)

S.I. = (8,000×4×1)÷(12×100)

S.I. = 32,000÷1200

S.I. = 27 dollars (approx).

Finally, we get simple interest for a month = 27 dollars.

**5.) How to calculate simple interest per day?**

To find daily simple interest, we will divide by 365 to the formula of S.I.

Simple Interest = (Principal×Rate×Time)÷(365×100)

Let's take some example to understand it-

### Q-1 If John purchases a car of 100,000 dollars and after taking a loan if the bank takes the interest at the rate of 8% per year. So find its daily simple interest.

Solve:-

Principal = 100,000 dollars, Time = 3 years, Rate = 8% p. a.

Simple Interest = (Principal×Rate×Time)÷(365×100)

S.I. = (100,000×8×3)÷(365×100)

S.I. = 2,400,000÷(365×100)

S.I. = 24,000÷365

S.I. = 66 dollars (approx)

So, John will give the 66 dollars per day.

### Q-2 What will be the S.I. for a day if the cost of the refrigerator is 3,000 dollars. And a man pays interest at the rate of 5% for 1 year.

Solve:-

Principal = 3,000 dollars, Time = 1 year, Rate = 5%.

Simple Interest = (Principal×Rate×Time)÷(365×100)

S.I. = (3,000×5×1)÷(365×100)

S.I. = 15,000÷(365×100)

S.I. = 150÷365

S.I. = 0.41 dollar (approx)

Per day interest will be 0.41 dollars.