Simple Interest

What is Interest?

Interest is the price paid for borrowing money.

Interest rates are usually expressed as a percent
of the amount borrowed.
 Important Terms
• Principal—the amount borrowed.
• Rate (or rate of interest)—percent of interest
charged by lender.
• Time—the length of time in years before
repayment is due.
 Simple Interest
• Simple interest is interest charged on the entire principal
for the entire length of the loan and is usually used for
short-term loans that last less than a year. It is found using
a modification of the basic percent formula.
Simple Interest = Principal x Rate x Time
SI = P x R x T
I = PRT

• The rate, R, is expressed as a decimal or fraction, and time,

T, is expressed as the number of years, or the fraction of a
year.
 Problems
• You get a student loan from the New Mexico Educational
Assistance Foundation to pay for your educational expenses
this year. Find the interest on the loan if you borrowed $2,000
at 8% for 1 year.
• You are starting your own small business in Albuquerque. You
borrow $10,000 from the bank at a 9% rate for 5 years. Find
the interest you will pay on this loan.
• You are tired at the end of the term and decide to borrow
$500 to go on a trip to Whatever Land. You go to the bank and
borrow the money at 11% for 2 years. a) Find the interest you
will pay on the loan. b) How much will you have to pay the
bank at the end of the two years?
• a) Find the interest on a loan of $2500 that is borrowed at 9%
for 7 months. b) How much would it cost to repay the loan?
 Problems
• In addition to using some of their own money, Gilbert
Construction Company must borrow $60,000 to build an 1800-
square-foot home. The owner, Susan Gilbert, is considering
whether she should borrow the funds at (a) 8% per year for 1 year
or (b) 8 per year for 1years. Which of the two loan should she
choose?
• An amount of $ 400 becomes $ 424 in 3 years at a certain rate of
simple interest, If the rate of interest increases by 8%, what
amount will $ 400 becomes in 2 years?
• Harshan took a loan at a rate of simple interest 7% in the year
with an increase of 0.25% in each subsequent year. He paid
interest of $ 4425 after 4 years. How much loan did he take?
• A lends 30% of sum at 30% p.a. 50% of sum at 14% p.a. and the
remaining sum at 12% p.a. rate of interest. What would be the
rate of interest, if the interest is calculated on the whole sum?
 Problems
• Ram invested some amount at the rate of 15% simple interest and a certain
amount at the rate of 20% simple interest. He received yearly interest of
$1900.But if he had interchanged the amounts invested, he would have
received $550 more as interest. How much did he invest at 20% simple
interest?
• Divide $ 8000 into two parts so that simple interest on first part for 3 year at
5% p.a. may be equal to simple interest on the second part for 5 year at 9%
p.a.
• A sum of money at simple interest amounts to $ 14160 in 3 year. If the rate
of interest is increased by 25%, the same sum amount to $ 14700 in the
same time. The rate of interest is?
• Harvey borrowed some money at the rate of 3% p.a. for the first 4 year, at
the rate of 4% p.a. for the next 3 year and at the rate of 9% p.a. for the
period beyond 7 year. If he pays a total simple interest of $ 21000 at the end
of 9 year, how much money did he borrow?
• A sum of Rs. 11000 is equally divided and invested at two different rates of
interest. The difference between the interests got after 3 year is Rs. 300.
What is the difference between the rates of interest?