SIMPLE INTEREST
SIMPLE INTEREST
SIMPLE INTEREST
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first find out how much money we have after one year:<br />
A = Pert<br />
A = Pe(.055)(1)<br />
A = 1.056541P.<br />
Therefore, after 1 year, whatever the principal was, we now have 1.056541P.<br />
Next, find out how much interest was earned, I, by subtracting the initial<br />
amount of money from the final amount:<br />
I = A − P<br />
= 1.056541P − P<br />
= .056541P.<br />
Finally, to find the effective rate of interest, use the simple interest<br />
formula, I = Prt. So,<br />
I = Pr(1) = .056541P<br />
.056541 = r.<br />
Therefore, the effective rate of interest is 5.65%.<br />
DATA SUFFICIENCY PROBLEM<br />
1. An amount of money was lent for 3 years. What will be the difference between the simple<br />
and the compound interest earned on it at the same rate?<br />
I. The rate of interest was 8 p.c.p.a.<br />
II. The total amount of simple interest was Rs. 1200.<br />
<br />
<br />
<br />
<br />
<br />
Answer: Option E<br />
Explanation:<br />
Given: T = 3 years.<br />
I. gives: R = 8% p.a.<br />
II. gives: S.I. = Rs. 1200.<br />
Thus, P = Rs. 5000, R = 8% p.a. and T = 3 years.
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