Interest in simple words it means the percentage of money you will get from an investment or the percentage you need to pay on the amount of money borrowed annually or periodically.
Interest can be classified as Simple interest and Compound interest. In this post we are going to learn about Simple interest.
In Simple Interest, the interest will be charged only on the initial principle amount.
For example when a person borrows a sum of Rs.1000 (this amount is the principle amount) with the interest rate of 10% p.a (Interest rate Per Annum) for five years (time period) under Simple Interest.
For the First year interest amount = 100
For the Second year interest amount = 100
For the Third year interest amount = 100
For the Fourth year interest amount = 100
For the Fifth year interest amount = 100
So total interest for 5 years = 500
But in Compound Interest, the interest amount of the previous year will be added to the principle amount and then the interest for the next year will be calculated.
A Sum of Rs. 1000 was put at Simple Interest at a rate of 5% for 2 years.
Find (i) Simple Interest (ii) AmountHere values for all the three essential things are given. Our work is only substituting in the formula directly and solving it.
SI = (1000*2*5)/100 = 100
P = SI + PI = 1000 + 100 = 1100
More Models soon...