Simple Interest Calculation Explained

This question asks us to find the simple interest earned on a principal amount over a specific period at a given monthly interest rate.

Understanding Simple Interest

Simple Interest is a basic way to calculate the interest charged on a loan or earned on an investment. It's calculated only on the original amount of money borrowed or invested (the principal). It does not compound, meaning interest earned in one period does not earn interest in the next.

Key Information Provided:

• Principal Amount ($P$): ₹1,200
• Interest Rate ($R$): 3% per month
• Time Period ($T$): 11 months

Formula for Simple Interest

The formula to calculate Simple Interest (SI) is:

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

Where:

• $P$ = Principal amount
• $R$ = Rate of interest per time period
• $T$ = Time period

It's important that the units for the rate ($R$) and the time ($T$) match. In this case, both are in months, which is consistent.

Step-by-Step Calculation

1. Identify the values:
   • $P = 1200$
   • $R = 3$ (since the rate is 3% per month)
   • $T = 11$ (in months)
2. Substitute the values into the formula:

   $ SI = \frac{1200 \times 3 \times 11}{100} $

3. Simplify the calculation:

   First, divide the principal amount by 100:

   $ SI = \frac{1200}{100} \times 3 \times 11 $

   $ SI = 12 \times 3 \times 11 $

   Now, multiply the numbers:

   $ SI = 36 \times 11 $

   $ SI = 396 $

4. Result:

   The simple interest calculated is ₹396.

Conclusion

Therefore, the simple interest on ₹1,200 at an interest rate of 3% per month for 11 months is ₹396.