SIMPLE INTEREST

1. I have Rs 7500/- which I deposit in a bank at a simple quarterly

interest of 8%. How much will the amount yield me in two and a half
years?

Explanation:
Simple Interest PRT
= 100
Principal = P = Rs. 7500
R 8
Rate of interest = R = 8% quarterly = = = 2%
4 4
Time period = T = 2.5 years = 4T = 10 (quarters)
Amount after 2.5 years = Principal + Simple Interest
Amount = 7500 7500 x 10 x 2
= 7500 + 1500 = Rs. 9000
+ 100

Tip:
For half yearly interest:- R R
and T= 2T
= 2
For quarterly interest:- R R
and T= 4T
= 4
For monthly interest:- R R
and T= 12T
= 12

2. Sujoy went to a mobile shop to buy a new mobile phone. The shop is
running an offer which says, you can buy the mobile phone at 20,000
Rs cash or you can initially make a payment of Rs 4000 and pay 4 equal
monthly installments. The rate of interest charged will be 8% pa. Find
the value of installment to be paid each month.

Explanation:

Down payment = Rs. 4000

Remaining Amount = Rs. 20000 - Rs. 4000 = Rs. 16000
After 4 months total amount to be paid = 16000 + Simple Interest on 16000
Simple Interest PRT 4
; T = 4 months = years
= 100 12
16000 x 8 x
∴ Total Amount = 16000 + 4 = 16000 + 426.67 = Rs. 16426.67
12 x 100
Now how to calculate installments?
Total installments = 4 (One installment per month)

Simple and Easy rule -

If there are 'n' installments, then, 1st installment will have interest for (n-1)
months, 2nd will have interest for (n-2) months and so on.

So in this case, n=4

∴ 1st installment will have interest for 3 months (n-1 = 4-1=3 months)
2nd installment will have interest for 2 months (n-2 = 4-2=2 months)
3rd installment will have interest for 1 month (n-3 = 4-3=1 month)
4th installment will have no interest (n-4 = 4-4=0 months)

Let each installment be of Rs. A

Total Amount = 4 Installments + Interest on those 4 Installments
∴ Total Amount = 4A P x R x T
+ 100
Now here, rate of interest is same for all installments = R = 8%
P = A     (same amount 'A' for all installments)
From above rule we can calculate effective time period 'T'
T (for interest calculation) = 3months + 2 months + 1 month + 0 months
∴ T = 6months 6
years
= 12
∴ Total Amount = 4A A x 8 x 6 4A 101A
= 4A + =
+ 100 x 12 100 25
∴ 101A
16426.67= 25
∴ A = Rs. 4066.01 (Each month installment)

Tip:
Since rate of interest is same we can use above short cut.
If rate of interest or installment amount (A) or both varies then we have to
calculate interest
separately for each installment by applying formula SI PRT
For every installment.
= 100

3. In 30 years an amount becomes 5 times the original amount. What is

the rate of interest?
Explanation:
Original amount = P
In T = 30 years, Amount = 5P
∴ Interest received in 30 years = 5P - P = 4P
Simple Interest PRT
= 100
P x R x 30
∴ 4P =
100
∴ R = 13.33%

4. When my father started working, he deposited some amount at

simple interest in the bank. After 15 years the amount became 7 times.
If the rate of interest remains, in how many more years will the amount
become 10 times?

Explanation:

Let initial amount = P

In T = 15 years, Amount becomes 7P
So, Simple Interest = 7P - P = 6P P x R x 15 ---------> As, SI PRT
= 100 = 100
∴ R = 40%
In how many years will amount become 10P?
R = 40%; Amount = 10P.
P x 40 x T
So, Simple Interest = 10P - P = 9P =
100
∴ T = 22.5 years (in this time, amount will be 10 times the original)

5. A certain amount becomes Rs 3000 at a simple interest of 12%. Keeping the time period
same, if the rate of simple interest is increased by 3%, the amount will become 300 Rs/-
more than in the previous setting. What is the amount? Also find the time period.

Explanation:

Let Simple Interest be S

Original sum 'P' and Time 'T' remains same
Also, 3% increase in rate of interested means, New rate = 15%
Increase of 300 Rs/- in the final amount means, New amount = Rs 3300/-
So, Amount 2 - Amount 1 = (P+S1) - (P+S2) = S1-S2
∴ 3300 - 3000 = S1-S2
∴ S1-S2 = 300

P x 15 x T P x 12 x T PRT
∴ - = 300 --------> As, Simple Interest =
100 100 100
3PT
∴ 10 = 300
0
PT = 10000
for R = 15%,
Simple Interest P x 15 x T 10000 x 15
= = Rs. 1500
= 100 100
Original sum = Amount - Interest = 3300-1500 = Rs. 1800 (Principle amount)
Also, PT = 10000
1000
∴T= 0 = 5.55 years (Time period)
1800