Concepts: Simple Interest | Quantitative Aptitude for Competitive Examinations - Banking Exams PDF Download

Simple Interest:

Formula:

1) SI = P x R x T/100 

2) Principal = Simple Interest ×100/ R × T

3) Rate of Interest = Simple Interest ×100 / P × T

4) Time = Simple Interest ×100 / P × R

5) If rate of Simple interest differs from year to year, then

Simple Interest = Principal × (R1+R2+ R3…..)/100

The four variables in the above formula are:
 SI=Simple Interest
 P=Principal Amount (This the amount invested)
 T=Number of years
 R=Rate of interest (per year) in percentage

 

1). A sum of money is divided into n parts in such a way that the interest on the first part at r1% for t1 years, on second part at r2% for t2 years, on third part at r3% for t3years and so on, are equal. Then the ratio in which the sum is divided in n part is:

1/r1×t1: 1/r2 ×t2: 1/r3×t3

Example:

A sum of Rs 7700 is lent out in two parts in such a way that the interest on one part at 20% for 5 yr is equal to that on another part at 9% for 6 yr. Find the two sums.

Solution:

Here, R1 = 20% R2 = 9%

T1 = 5 yr T2 = 6 yr

By using formula, ratio of two sums  = 1/100 : 1/54 = 27 : 50

Therefore, first part = [27/(27+50)]*7700 = Rs 2700

Second part = [50/(27+50)]*7700 = Rs 5000

 

2). Amount = Principal + S.I = p + [(p x r x t)/100]

Example:

What Principal will amount to Rs. 16000 in 6 years at 10% simple interest?

Solution:

Let the principal be Rs. p, given rate of interest is 10% and time = 6 years.
 Amount received at the end of 6 years = 16000 Rs.
 => 16000 = p + (p x 10 x 6)/100 = p + 6p/10 = 16p/10 => P = 16000 x (10/16) = 1000 x 10 = 10000 Rs.
 Principal should be Rs. 10000

3). If sum becomes n times in T yr at simple interest, then formula for calculating rate of interest
R =100(n-1) /T %
4). A sum of money becomes 4 times in 20 yr at SI. Find the rate of interest?
 R =100(4-1)/20
 =100*3 / 20 =5*3 =15
5). If A sum becomes n times in at certain rate of interest .then the time taken in                    which the same amount will be n times at the same rate of interest:
= (n-1)/2 × T (n = number of times)

6). If A sum becomes 3 times in at certain rate of interest in 5years .find the time taken in  the same amount will be 8 times at the same rate of interest:
 =(8-1)/2*5
 = 7/2 * 5
 =17.5years

The document Concepts: Simple Interest | Quantitative Aptitude for Competitive Examinations - Banking Exams is a part of the Banking Exams Course Quantitative Aptitude for Competitive Examinations.
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FAQs on Concepts: Simple Interest - Quantitative Aptitude for Competitive Examinations - Banking Exams

1. What is simple interest and how is it calculated?
Ans. Simple interest is a straightforward method for calculating interest on a loan or investment. It is determined by multiplying the principal amount (the initial sum of money) by the interest rate and the time period. The formula for calculating simple interest is: Interest = Principal x Interest Rate x Time.
2. Can you provide an example of how to calculate simple interest?
Ans. Certainly! Let's say you have a loan of $10,000 with an interest rate of 5% and a duration of 2 years. To calculate the simple interest, you would use the formula: Interest = $10,000 x 0.05 x 2 = $1,000. Therefore, the total interest on the loan would be $1,000.
3. How is simple interest different from compound interest?
Ans. Simple interest is calculated only on the initial principal amount, whereas compound interest takes into account the accumulated interest from previous periods as well. In simple interest, the interest remains constant throughout the entire duration, while in compound interest, the interest amount increases over time.
4. What are the advantages of using simple interest?
Ans. Simple interest is easy to calculate and understand, making it suitable for quick estimations. It is commonly used for short-term loans or investments where the interest rate remains constant. Additionally, simple interest can be beneficial for borrowers as they know the exact amount of interest they need to pay.
5. Are there any limitations or drawbacks to using simple interest?
Ans. Yes, there are a few limitations to consider. Simple interest does not take into account the compounding effect, which can result in lower returns compared to compound interest. It may also not accurately reflect the true cost of borrowing or the growth potential of an investment over a longer time period. Therefore, for long-term loans or investments, compound interest calculations are generally more accurate.
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