Simple Interest Calculation Explained

This solution explains how to calculate the simple interest for a given principal amount, time period, and rate of interest.

Understanding Simple Interest Calculation

The question asks us to find the simple interest on a sum of money borrowed over a specific period at a given annual interest rate. Simple interest is calculated only on the initial principal amount.

Simple Interest Formula

The formula to calculate Simple Interest (SI) is:

$ SI = \frac{P \times T \times R}{100} $

Where:

• P is the Principal amount (the amount borrowed).
• T is the Time period (in years).
• R is the Rate of interest (per annum, in percentage).

Identifying Given Values

From the question, we can identify the following values:

• Principal (P) = ₹400
• Time (T) = 4.5 years
• Rate (R) = 8% per annum

Step-by-Step Calculation of Simple Interest

Let's plug these values into the simple interest formula:

$ SI = \frac{400 \times 4.5 \times 8}{100} $

We can simplify this calculation step-by-step:

1. Divide the Principal by 100: $ \frac{400}{100} = 4 $
2. Multiply the result by the Time and Rate: $ SI = 4 \times 4.5 \times 8 $
3. First, multiply the Time and Rate: $ 4.5 \times 8 = 36 $
4. Finally, multiply this result by the simplified Principal factor: $ SI = 4 \times 36 $ $ SI = 144 $

Final Result

The calculated simple interest is ₹144. This is the amount of interest that accrues on the ₹400 loan over 4.5 years at an 8% annual interest rate.