Shortcut Trick
Total amount % for 5.5 years at 7.5% = 100% + (7.5 × 5.5)% = 141.25%
Total interest % for 8.25 years at 7.5% = (7.5 × 8.25)% = 61.875%
Given 141.25% → ₹16,950 ⇒ 1% → 16,950 ÷ 141.25 = ₹120
Required Simple Interest = 61.875% × 120 = ₹7,425
∴ The correct answer is ₹7425.
Alternate Method
Given:
Rate (R) = 7.5% p.a.
Time (T1) = 5.5 years
Amount (A) = ₹16,950
Time (T2) = 8.25 years
Formula Used:
Simple Interest (SI) = (P × R × T) ÷ 100
Amount (A) = P + SI
Principal
100%
5.5 yrs @ 7.5%
Int: + 41.25%
Amount (141.25%)
₹16,950
Principal
100%
8.25 yrs @ 7.5%
Int: + 61.875%
Interest (61.875%)
₹7,425
Calculations:
⇒ Let the principal sum be P.
⇒ Total interest percentage for 5.5 years = 7.5% × 5.5 = 41.25%
⇒ Amount = P + 41.25% of P = 141.25% of P
⇒ 141.25% of P = 16,950
⇒ P = (16,950 × 100) ÷ 141.25
⇒ P = 1,695,000 ÷ 141.25 = ₹12,000
⇒ Now, Simple Interest for 8.25 years:
⇒ SI = (12,000 × 7.5 × 8.25) ÷ 100
⇒ SI = 120 × 7.5 × 8.25
⇒ SI = 900 × 8.25 = ₹7,425
∴ The correct answer is ₹7425.
Additional Information
Simple Interest vs Compound Interest
Simple Interest is calculated only on the principal amount, remaining constant each year. Compound Interest is calculated on the principal plus any previously accumulated interest.
Effective Simple Interest Rate
Total simple interest over a time period can be directly calculated as an effective percentage of the principal using the formula: Effective Rate = Rate × Time (in %).
Proportionality of Simple Interest
For a given sum and fixed rate, the Simple Interest earned is directly proportional to the time duration. (i.e. SI1 ÷ SI2 = T1 ÷ T2).