Simple Interest Guide & Practice
Practice SI formula, finding principal/rate/time, comparing SI and CI, and installment problems with solved examples and free mock tests. Explore dynamic solver blueprints, master fundamental equations, examine step-by-step solved examples, and practice with real exam-grade mock test sets.
1. Fundamentals & Definitions
- Interest: The cost of borrowing money or the return earned on invested funds over time. It is a percentage of the principal amount.
- Simple Interest (SI): A straightforward method of calculating interest only on the initial principal amount over a specified period at a fixed interest rate. Interest is not compounded, meaning interest is not earned on previously earned interest.
- Principal (P): The initial amount of money borrowed, lent, or invested.
- Rate (R): The percentage at which interest is charged or earned per year.
- Time (T): The duration for which the money is borrowed or invested, usually expressed in years.
- Amount (A): The total sum of the principal and the interest.
2. Core Concepts & Formulas
Main Formula
The formula to calculate Simple Interest is:
SI = (P × R × T) / 100
Where:
SI= Simple InterestP= Principal AmountR= Annual Interest Rate (in percent)T= Time Period (in years)
Derived Formulas
From the main formula, we can derive formulas to find the other variables:
- To find Principal (P):
P = (SI × 100) / (R × T) - To find Rate (R):
R = (SI × 100) / (P × T) - To find Time (T):
T = (SI × 100) / (P × R)
Total Amount
The formula to calculate the total amount to be repaid or received after the time period is:
Amount (A) = Principal (P) + Simple Interest (SI)
A = P + (P × R × T) / 100
A = P × (1 + (R × T) / 100)
Simple Interest vs. Compound Interest
| Aspect | Simple Interest | Compound Interest |
|---|---|---|
| Calculation | Interest is calculated only on the principal amount. | Interest is calculated on the principal and the accumulated interest over time. |
| Formula | SI = (P × R × T) / 100 | CI = P * (1 + R/100)^T - P |
| Interest Growth | Linear growth; interest amount remains constant each year. | Exponential growth; interest amount increases each year. |
| Interest on Interest | No interest is earned on interest. | Interest is earned on previously earned interest, leading to higher returns. |
Solved Examples
Question: Find the Simple Interest (SI) for a principal amount of Rs. 4,000, for a duration of 2 years at a rate of 20% per annum.
Question: Amy invests $3,000 in a savings account at an annual interest rate of 5%. Calculate the difference between the simple interest and compound interest earned after 3 years.
Question: A sum of money doubles itself in 7 years at simple interest. In how many years will it become four times itself?