Understanding Interest on Capital
To calculate the interest on capital, we use the formula for simple interest:
Interest (I) = Principal (P) × Rate (R) × Time (T)
Where:
- Principal (P) is the initial amount of capital.
- Rate (R) is the annual interest rate.
- Time (T) is the time period in years.
Let's break down the calculation for the given values.
Given Data
- Principal (P): 1,50,000
- Rate (R): 6% per annum
- Time (T): 9 months
Converting Time
- Since the time must be in years for the formula, we convert 9 months into years:
- 9 months = 9/12 = 0.75 years
Calculating Interest
Now, we can substitute the values into the formula.
- Interest (I) = 1,50,000 × (6/100) × 0.75
Step-by-Step Calculation
- First, calculate the rate:
- 6/100 = 0.06
- Next, multiply:
- 1,50,000 × 0.06 = 9,000
- Finally, multiply by the time:
- 9,000 × 0.75 = 6,750
Final Result
- The interest on a capital of 1,50,000 at 6% per annum for 9 months is 6,750.
Conclusion
Understanding how to calculate interest on capital is essential for informed financial decisions, whether for personal finance or business operations. This simple method helps you gauge the profitability of your investments effectively.