Understanding Simple Interest
Simple interest is calculated using the formula:
Simple Interest (SI) = (Principal x Rate x Time) / 100
Where:
- Principal is the initial amount of money
- Rate is the interest rate per annum
- Time is the duration in years
Given Data
- Principal (P) = Rs. 3125
- Rate (R) = 15% per annum
- Time (T) = 73 days
Convert Time into Years
To calculate interest, we need to convert the time from days to years:
- 1 year = 365 days
- T in years = 73 days / 365 = 73/365 ≈ 0.2 years
Calculate Simple Interest
Now we can substitute the values into the formula:
- SI = (3125 x 15 x 73/365) / 100
Breaking Down the Calculation
- First, calculate the numerator:
- 3125 x 15 = 46875
- 46875 x 73 ≈ 3414375
- Then, calculate the denominator:
- 100 x 365 = 36500
- Finally, divide the two results:
- SI = 3414375 / 36500 ≈ 93.7
Final Amount of Simple Interest
The simple interest on Rs. 3125 at 15% per annum for 73 days is approximately Rs. 93.7.
Conclusion
Using the simple interest formula provides a straightforward way to determine the interest earned over a specific period. Understanding this concept is essential for financial literacy and effective money management.