Simple Interest Rate

The formula for estimating simple interest is :

I=P R T
* *

Where,

P = principal amount

R = Simple Interest Rate for one period (usually 1 year)

T = Number of periods (years)

Q. What is the amount an investor will get on a 3-year fixed deposit of Rs. 10000 that pays 8% simple intere

Answer: Here we have

P = 10000, R = 8% and T = 3 years I = P R T = 10000 8% 3 = 2400

* * * *
Amount = Principal + Interest = 10000+2400 = 12400.
00 that pays 8% simple interest?
The formula used for calculating total amount under this method is as under:

Where

A = Amount on maturity
R = interest rate
m = number of compounding in a year T = maturity in years

Example 3.2

What is the amount an investor will get on a 3-year fixed deposit of Rs. 10000 that pay 8% interest compounde

Answer:

Here P = 10000, R = 8% and T = 3, m = 2. The total interest income comes to:

Amount = Principal + Interest = 10000+2653.20 = 12653.20.

Example 3.3

Consider the same investment. What is the amount if the interest rate is compounded monthly?

Answer:

Here P = 10000, R = 8% and T = 3, m = 12. The total interest income comes to:
Amount = Principal + Interest = 10000+2702.37 = 12702.37.
8% interest compounded half yearly?
Example 3.4

Consider the same investment (Rs. 10000 for 3 years). What is the amount received on
maturity if the interest rate is 8% compounded continuously?

Answer: