Calculating Charge Given on Simple Interest Video Lecture - Class 7

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let's see what is percentage in simple
interest so how is this interest given
back to the bank like I said that you
give some extra money to the bank so who
decides that how much extra money you
have to give to the back obviously the
bank because the bank has given you
money so the bank will decide how much
extra money the bank means so this
interest is generally given in percent
for a period of one euro that means
let's say that you have taken some
amount of money you have taken rupees X
from the bank now if you return that
rupees X after one year you give maybe
let's say 10% interest for that rupees
to the bank let's see if you return it
after three years in every year you have
to give that extra 10% so at the end of
three years you pay the interest the
total interest that you pay for three
years is a lot more than the total
interest that you pay it for one year so
basically this interest is always given
is percentage and this person thing this
person took interest you have to give
every year that means if you take whole
number of years to return the money to
the bank you will end up spit giving a
lot of interest to the bank right so
that is why it is always wise that if
you take a loan from a bank
trying to give it back or try to return
it to the back as early as possible so
you so that you do not end up paying
huge interest for that money so how do
we denote interest it is denoted as X
percent per year or per annum and this
is written as X percent per annum so
this X would be
the interest rate would be 10% per annum
it could be 0.5% per annum so it could
be anything so this is how it is denoted
so per annum means per year so every
year you have to give 10% interest so
this 10 person would be on the principle
that means the amount which the bank the
money that the bank gave you
let's say let me give you an example let
us say that this is you and this is the
bank so the bank gave you rupees 100 or
the bank lender rupees hundred you
borrowed rupees hundred from the bank so
basically your principal is rupees
hundred now let's say that the bank gave
it to you at an interest of rupees of
her ten percent per annum that means at
the end of one year after one year what
is the amount that you will return to
the bank principal amount which was
hundred plus ten percent of the
principal amount so basically you will
return to the bank hundred plus ten by
100 into hundred which is actually equal
to hundred and ten
so you took rupees 100 but you are
returning rupees hundred then so
basically this is how the rate of
interest works now in case you do not
return it in one year so if you are
returning it the next year in that case
what is happening for this year also you
pay ten percent of hundred for the next
year also you pay ten percent of hundred
so instead of one hundred ten you might
pay one hundred twenty if you are
returning it after three years you might
pay one hundred thirty and so on so if
you take longer duration to return that
money to the bank you end up paying more
interest so this is the concept of
simple interest now let me give an
example let us say that rupees ten
thousand is invested by the bank at 5%
interest rate per annum invested means
the bank gave that money so that it can
make profit out of it so the bank has
maybe lending that money to
someone like us who is borrowing that
money from the bank so to these 10,000
what is this rupees 10,000 it is nothing
but the principal because this is the
money which is given by the back so this
is the principal and what is the 5%
interest rate piranha this is the
percentage of interest that you have to
pay to the bank every year so how much
is the English how much interest you
will have to pay to the bank at the end
of one year so interest at the end of
one year will be equal to 5% of the
principal amount that means 5% of rupees
10,000 so this would be equal to 5 by
hundred into 10,000 so this would be
equal to rupees 500 that means at the
end of one year how much money you have
to return to the back this 10,000 which
which is the principal plus this
interest which is rupees 500 so
basically the amount that you will
return to the bank after one year will
be equal to rupees 10,000 plus rupees
500 that is rupees ten thousand five
hundred this is the money that you will
have to return to the back so this was
about the interest that you will return
after one year now let us see what would
be the interest that you will have to
pay for multiple years because sometimes
it might happen that since you have
taken a loan of a heavy amount you
cannot return it back in one year you
might need five years to return that
money so in that case how will they how
will you pay the interest now as the
number of yours increase interest also
increase so if you return the money in
five years you will pay more interest if
you return the same money in 10 years
you will be even more interest and so on
so what basically happens is this so let
us say that the principal that means the
money which was given by the bank to you
that principal is P so we are just
denoting it with P and
let us say that the time for which the
money was borrowed so time for which you
borrowed the money is T this T yours so
you borrowed it 40 years this T could be
anything it would be 5 10 20 30 anything
right so let's say that you have
borrowed this money P 40 years
and let us say that the percentage of
interest that is offered by the bank
this is called the rate of interest so
as you saw right that interest is always
offered in percentage by the bank per
annum percentage per annum so this
percentage per atom is called the rate
of interest so let's say that the rate
of interest that is offered by the bank
is our per annum that is our percent per
annum perfect okay now if I ask you to
calculate how much interest you have to
pay at the end of one year so interest
at the end of one year so we have
denoted interest is I so interest at the
end of one year would be how much it
would be our percent that is the
interest rate that is given by the bank
our percent of the principal amount and
since it is at the end of one year so
this is multiplied by 1 so you have to
give it to one time only after the end
of that one year so this would be our
percent of P which is equal to R by
hundred into P now if we want to
calculate the interest at the end of t
years
now this T could be anything it would be
5 10 15 20 anything so what would be the
interest that you will have to pay at
the end of tiers in this case you are
paying this same interest which you are
repaid for one year this interest you
are
every year 40 years let's say that maybe
this value is rupees 10 so let's say for
one year you paid rupees 10 as interest
for 2 years how much interest you'll pay
rupees 10 into 2 for 3 years how much
interest you will pay rupees 10 equal 3
for 4 years you will pay 10 into 4 and
so on
similarly the interest that you will pay
40 years is nothing but the interest
that you paid for one girl multiplied by
P so this is the interest that you would
pay after multiple years so when you
have borrowed money forward people years
then the interest and this interest is
called simple interest by simple
interest because here the interest every
year the interest is calculated on the
principle so if the principal doesn't
change now you might think that okay so
do we have another type of interest as
well where the principal doesn't remain
constant yes we do have and that is
called compound interest so you will
learn about compound interest in your
higher classes for now let us focus with
simple interest so there in simple
interest that you pay at the end of T
years is nothing but P into R into P
divided by hundred
now a lot of times I've seen that
children just memorize this formula of
simple interest you you can you actually
will come across a lot of children who
would have learned this formula for
simple interest but they would have
never understood from where did they get
this formula so you did not need to
memorize it because you would have seen
it for yourself it's nothing to memorize
it is use that simple interest at the
end of t years will be nothing but the
rate of percentage on the principle that
is our percentage of P multiplied by P
so that gives you P into R into T by 100
so this is how we calculate simple
interest for multiple years you see
these are ready a practical concepts and
these are very important as well so
please give a lot of attention on all
these and also solve a lot of questions
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