Rahi deposited Rs. 600 in a bank that promised 8% simple interest per annum. If Rahi kept the money with the bank for 5 years, she will earn an interest of:
Rs. 240
Understanding Simple Interest Calculation
Simple interest is a method of calculating the interest earned on the principal amount at a fixed rate over a specific period. The formula for simple interest is straightforward and widely used for basic loan and deposit calculations.
Simple Interest Formula Explained
The formula to calculate Simple Interest (SI) is:
$$ \text{SI} = \frac{\text{P} \times \text{R} \times \text{T}}{100} $$
Where:
- P is the Principal amount (the initial amount deposited or borrowed).
- R is the Rate of interest per annum (yearly rate).
- T is the Time period in years.
Applying the Formula to Rahi's Deposit
Let's identify the values given in the question:
- Principal (P) = Rs. 600
- Rate of Interest (R) = 8% per annum
- Time Period (T) = 5 years
Now, we can plug these values into the simple interest formula to find out how much interest Rahi will earn.
$$ \text{SI} = \frac{600 \times 8 \times 5}{100} $$
First, let's multiply the numbers in the numerator:
$$ 600 \times 8 \times 5 = 600 \times 40 = 24000 $$
Now, divide the result by 100:
$$ \text{SI} = \frac{24000}{100} = 240 $$
So, Rahi will earn Rs. 240 as simple interest over 5 years.
Comparing Calculated Interest with Options
The calculated simple interest is Rs. 240. We compare this with the given options:
- Option 1: Rs. 480
- Option 2: Rs. 240
- Option 3: Rs. 200
- Option 4: Rs. 280
Our calculated interest of Rs. 240 matches Option 2.
Revision Table: Simple Interest Components
| Term | Description | In Rahi's Case |
|---|---|---|
| Principal (P) | The initial amount of money. | Rs. 600 |
| Rate (R) | The percentage at which interest is charged or earned per year. | 8% |
| Time (T) | The duration for which the money is kept or borrowed. | 5 years |
| Simple Interest (SI) | The interest earned only on the principal amount. | Rs. 240 |
Additional Information on Simple vs. Compound Interest
It's important to distinguish simple interest from compound interest. While simple interest is calculated only on the initial principal, compound interest is calculated on the principal amount and also on the accumulated interest from previous periods. This means compound interest grows faster than simple interest over time, assuming the same rate and time period.
For instance, with compound interest, in the second year, interest would be calculated on Rs. 600 plus the interest earned in the first year. With simple interest, it's always just on the initial Rs. 600.
Similar Questions
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Important Questions from Simple Interest
If ₹12,800 is invested in a bank for 5 years at the rate of 9% per annum simple interest. what amount is returned by the bank?
Somu has borrowed ₹10,000 from a money lender with simple interest at a rate of 7% half yearly. How much amount will he pay to the money lender after 3 years?
Find the Simple interest on Rs. 2,400 from 20 March 2019 to 31 may 2019 at \(6{1 \over 4}\) % rate?
If the simple interest for five years is equal is 35% of the principal, that rate of interest is:
A sum fetched a simple interest of Rs. 3,040 at the rate of 8% p.a in 5 years. what is the sum?
