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14 Simple Interest

# 14 Simple Interest

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05/13/2014

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14
14.1DEFINITION
PRT
*
Simpleinterest
=
A-P
=
rsn
100
(1)
If
aperson
A
borrowssomemoneyfromanotherperson
B
interest.
Theactuallyborrowedmoneyby
A
iscalled
principal
(SUM).Theprincipalandtheinteresttogetheriscalled
amount.
The
injerest
thattheborrowerhastopay..forevery100rupeesborrowedeachyearisknownas
ratepercentperannum.
Itisdenotedas
R%
per
R
annum
=
100'Thetimeforwhichtheborrowedmoneyhasbeenusediscalledthe
time.
Itisdenotedas
T
years.Theinterestisdirectlyproportionaltotheprincipal,therateandthetimeforwhichtheborrowedsumisused.Iftheinterestonacertainsumborrowedforacertainperiodisreckoneduniformly,thenitiscalled
SimpleInterest
anddenotedas
S.l.
:.SimpleInterest
(S.I.)
=
P
x
1~0
x
T,
where
P
=
Principalorthesumborrowed
R
=
Ratepercentperannum
T
=
Numberofyearsforwhichtheborrowedmoneyhasbeenused.Now,simpleinterest
+
principal
=
amount~Simpleinterest
=
amount-principalIfamountisdenotedby
'A',
then
14.2EFFECTOFCHANGEOF
P,
RANDTON
SIMPLEINTEREST
S·S'I'
PRT
mce,
lIDp
einterest
=--
100
*
SpecialMemoryClipsforuseofrelation(1)
fflT
lOOx~
(1)SI
=--
canberearrangedasperrequirementoftheproblemas
P
=,
R
=
H){).
RT
100x
Sf
and
T
=,
so,
in
eachcasewefindthenumeratoras100xSIandthedenominatorasproductofothertwo.
RT
AI
-ll
llRllI
(2)Twodifferentcasescanbecomparedbyusingtherelationas
Az
-P
2
P
2
R
2
T
2
lOOx
Sf
PT
-------

14-2
QuantitativeAptitudeforCompetitiveExaminations
so,
if
thevalueof
P,R
or
T
changes,thenthevalueofsimpleinterest
(SI)
willalsochange.Itimpliesthat/-allthreeparameters
P,R
and
T
maychange-anytwoofthesemaychangeandoneparameterremainsfixed-anyoneparametermaychangeandremainingtwoparametersarefixed
In
allthesecases,simpleinterest
(SI)
willchange
In
suchcases,ProductoffixedparametersChangeinsimpleinterest
=
x
(differenceofproduct100ofvariableparameters)ChangingRxample:At5%simpleinterest,asumofRs500fetchesRs36morethantheamountofinterestaccruedonRs380forthesameperiodandrate.Findthetime.
elution:
Here,onlytheprincipalisvariable.Thetimeandratearefixed.Usingtherelation(in14.2).
productoffixedparameters..
Changeinsimpleinterest
=
x(differenceofproductof100variableparameters)
T
x5
36
=--
x
(500-380)100
'-I
T
=
6
years
'------+
itisonlydifferencebecausethereisonevariableparameterExample:Thesimpleinterestonacertainsumfor
4
yearsat7.5%perannumisRs95
lessthanthe
simpleinterestonthesamesumfor3.5yearsat
rO%
perannum.Findthesum.
_
Solution:
Heretheprincipalisfixed.Lettheprincipal(sum)beRs
P
Timeandratearevariable(changing)Usingtherelation(in14.2),productoffixedparametersChangeinsimpleinterest
(Sl)
=
x
(differenceofproductof100variableparameters)95
=
_!!_
x(4x7.5-3.5x10)100
P
=
95x20
=
1900(here,
P
isonlyfixedparameter).Hence,therequiredsum
=
Rs1900
V:;-.3~AM-":OUNT"
--
PRINCfPAL(SUM)~actuallyborrowedmoneySIMPLEINTEREST~interestaccruedonthesumborrowedAMOUNT~moneytobereturnedbytheborrower
+
A
=
Amount
=
Principal
+
SimpleInterest
=
P
T
Sl
In
termsofprincipal,
A
=
P
+
Sl
=
P
+
PRT
=
P(l
+
RT)
o
100100Intermsofsimpleinterest,
A
=
P
+
Sl
=
100xS1
+
Sl
=
Sl(l
+
100)
RT·RT

SimpleInterest
14-3
A=-
P(I+
RT)=-SI
(1+100)
100
RT
.>
14.4AMOUNTBECOMES
N
TIMESTHEPRINCIPAL
PRINCIPALRATEOFINTEREST
PR%
p.a.TIME
T
AMOUNTBECOMESand
eN
xp)
f~
then,followingrelationisuseful,
/
(R
X
T=-
100
(N-IV
i
14.5
REPAYMENTOFDEBTINEQUALINSTALMENTS
BORROWED(DEBT)AMOUNT=-Rs
M
Tobepaidbackin"equal"instalments
...
Instalmentno.
1__
Instalmentno.2--BORROWEDAMOUNT(DEBT)=-
M
=
Instalmentno.
n__
ran(n
-1)
na+
x---
100x
y
2
)
where,
r
=-rateofinterestperannum
y
=
no.ofinstalmentsperannum
y
=
1,wheneachinstalmentispaidyearly
y
=-2,wheneachinstalmentispaidhalf-yearly
y
=-4,wheneachinstalmentispaidquarterly
y
=-12,wheneachinstalmentispaidmonthly
14.6
RATEANDTIMEARENUMERICALLYEQUAL
Here,Ratepercentperannum=-
R
Time
=
T
numericvalueof
R
=
T
Principal
=
P
SimpleInterest=-
SI
(hT~~J
(3)

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