Simple Interest
Subject: Mathematics | Topic: Simple Interest
For TLT, ECT, PST, JEST & All Competitive Exams
When we borrow or lend money, the lender usually charges an extra amount over the original sum — this extra amount is called Interest. Simple Interest is the most basic and commonly tested way of calculating this extra amount, and it appears regularly in the Mathematics/Quantitative section of TLT, ECT, PST, and JEST exams.
What is Simple Interest?
Simple Interest (S.I.) is the interest calculated only on the original amount (Principal) that was borrowed or invested, for the entire time period. Unlike Compound Interest, it does not add previous interest back into the principal for future calculations — so it grows at a constant, steady rate every year.
Key Terms
- Principal (P): The original sum of money borrowed or invested.
- Rate (R): The percentage of interest charged per year (per annum).
- Time (T): The duration for which the money is borrowed or invested, usually in years.
- Simple Interest (S.I.): The extra amount paid/earned on the principal.
- Amount (A): The total money to be paid back = Principal + Simple Interest.
S.I. = (P × R × T) / 100
Amount Formula:
A = P + S.I.
Simple Interest Formula Breakdown
Solved Examples
Example 1: Find the Simple Interest
Find the Simple Interest on Rs. 5,000 for 3 years at the rate of 6% per annum.
Solution:
P = 5000, R = 6%, T = 3 years
S.I. = (P × R × T) / 100 = (5000 × 6 × 3) / 100 = 90000 / 100 = Rs. 900
Example 2: Find the Total Amount
Find the total amount to be paid back on a loan of Rs. 8,000 for 2 years at 5% per annum simple interest.
Solution:
P = 8000, R = 5%, T = 2 years
S.I. = (8000 × 5 × 2) / 100 = 80000 / 100 = Rs. 800
Amount (A) = P + S.I. = 8000 + 800 = Rs. 8,800
Example 3: Find the Rate of Interest
At what rate percent per annum will Rs. 4,000 amount to a Simple Interest of Rs. 480 in 4 years?
Solution:
S.I. = 480, P = 4000, T = 4
Rearranging the formula: R = (S.I. × 100) / (P × T) = (480 × 100) / (4000 × 4) = 48000 / 16000 = 3% per annum
Rearranged Formulas (Very Useful for MCQs)
| To Find | Formula |
|---|---|
| Simple Interest (S.I.) | S.I. = (P × R × T) / 100 |
| Principal (P) | P = (S.I. × 100) / (R × T) |
| Rate (R) | R = (S.I. × 100) / (P × T) |
| Time (T) | T = (S.I. × 100) / (P × R) |
Why This Topic Matters
Simple Interest is a foundational Mathematics topic used in banking, loans, savings, and everyday financial calculations. Since it involves a simple, memorable formula, it is one of the most reliable, high-scoring topics in the Quantitative Reasoning/Mathematics section of TLT, ECT, PST, and JEST exams.
Practice MCQs
1. What is the formula for Simple Interest?
a) S.I. = P + R + T b) S.I. = (P × R × T) / 100 c) S.I. = P × R × T d) S.I. = P / (R × T)
2. Find the Simple Interest on Rs. 2,000 for 2 years at 5% per annum.
a) Rs. 100 b) Rs. 200 c) Rs. 400 d) Rs. 50
3. What does "P" represent in the Simple Interest formula?
a) Percentage b) Principal c) Period d) Profit
4. If S.I. = Rs. 600, P = Rs. 3000, and T = 4 years, find the Rate.
a) 3% b) 5% c) 6% d) 8%
5. What is the total Amount if Principal is Rs. 1,000 and Simple Interest is Rs. 150?
a) Rs. 850 b) Rs. 1,150 c) Rs. 1,000 d) Rs. 150
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