An amount of ₹6,900 is obtained after 3 years at simple interest at the rate of 5% interest per annum. What is the principal invested?
- AOption (a)
₹6,000
- BOption (b)
₹5,800
- COption (c)
₹6,400
- DOption (d)
₹5,600
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Correct answer
₹6,000
Why this answer is correct
Shortcut Trick
Effective Simple Interest rate for 3 years at 5% = 3 × 5% = 15%.
Total Amount = Principal + Interest = 100% + 15% = 115%.
Given that 115% represents ₹6,900.
Principal (100%) = (6,900 ÷ 115) × 100 = 60 × 100 = ₹6,000.
∴ The correct answer is ₹6,000.
Alternate Method
Given:
Total Amount (A) = ₹6,900
Rate of Interest (R) = 5% per annum
Time Period (T) = 3 years
Formula Used:
Amount (A) = Principal (P) + Simple Interest (SI)
A = P + (P × R × T) ÷ 100 ⇒ A = P × [1 + (R × T) ÷ 100]
Calculations:
⇒ 6900 = P × [1 + (5 × 3) ÷ 100]
⇒ 6900 = P × [1 + 15 ÷ 100]
⇒ 6900 = P × [1 + 0.15]
⇒ 6900 = P × 1.15
⇒ P = 6900 ÷ 1.15
⇒ P = (6900 × 100) ÷ 115
⇒ P = 60 × 100
⇒ P = ₹6,000
∴ The correct answer is ₹6,000.
Additional Information
Simple Interest (SI)
It is the interest calculated only on the original principal amount for every time period. Formula: SI = (P × R × T) ÷ 100.
Total Amount in SI
The total sum returned after the time period is A = P + SI = P(1 + RT/100). The Principal remains constant in SI calculations.
Comparison with Compound Interest
Unlike SI, Compound Interest (CI) is calculated on the principal plus the accumulated interest of previous periods. For the first year, SI and CI are equal if compounded annually.