Saathi deposited Rs. 825 in a bank that promised 8% simple interest per annum. If Saathi kept the money with the bank for 5 years, she will earn an interest of:
Rs. 330
Calculating Simple Interest Earned on a Bank Deposit
The question asks us to calculate the simple interest earned on a principal amount deposited in a bank over a certain period at a fixed interest rate.
Simple interest is calculated only on the initial principal amount. It is the easiest method to calculate interest on a loan or deposit.
Understanding the Simple Interest Formula
The formula for calculating Simple Interest (SI) is:
\( SI = \frac{P \times R \times T}{100} \)
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 Saathi's Deposit
From the question, we are given the following information:
- Principal Amount \( (P) \) = Rs. 825
- Rate of Interest \( (R) \) = 8% per annum
- Time Period \( (T) \) = 5 years
Now, we substitute these values into the simple interest formula:
\( SI = \frac{825 \times 8 \times 5}{100} \)
Step-by-Step Simple Interest Calculation
Let's perform the calculation:
- Multiply the rate and time: \( 8 \times 5 = 40 \)
- Multiply the principal by the result from step 1: \( 825 \times 40 \)
- \( 825 \times 40 = 33000 \)
- Divide the result by 100: \( \frac{33000}{100} \)
- \( \frac{33000}{100} = 330 \)
So, the Simple Interest earned by Saathi is Rs. 330.
Summary of Simple Interest Calculation
| Component | Value |
|---|---|
| Principal (P) | Rs. 825 |
| Rate (R) | 8% p.a. |
| Time (T) | 5 years |
| Simple Interest (SI) | \( \frac{825 \times 8 \times 5}{100} \) = Rs. 330 |
Therefore, Saathi will earn an interest of Rs. 330 after 5 years.
Revision Table: Simple Interest Concepts
| Term | Definition | Formula (if applicable) |
|---|---|---|
| Principal (P) | The initial amount of money deposited or borrowed. | - |
| Rate (R) | The percentage at which interest is charged or earned per period (usually per year). | - |
| Time (T) | The duration for which the money is deposited or borrowed. Must be in years for standard formulas. | - |
| Simple Interest (SI) | Interest calculated only on the principal amount. | \( SI = \frac{P \times R \times T}{100} \) |
| Amount (A) | The total sum of principal and interest after the given time. | \( A = P + SI \) or \( A = P \left(1 + \frac{RT}{100}\right) \) |
Additional Information: Simple vs. Compound Interest
It's important to distinguish simple interest from compound interest.
- Simple Interest: Interest is earned only on the original principal amount. The interest earned each period is the same, assuming the rate and principal are constant.
- Compound Interest: Interest is earned on the principal amount AND on the accumulated interest from previous periods. This means the interest earned grows over time as the base amount (principal + accumulated interest) increases.
The question explicitly states "simple interest", so we use the simple interest formula.
Similar Questions
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Important Questions from Simple Interest
How much time will it take for an amount of Rs. 450 to yield Rs. 81 as interest at 4.5% per annum of simple interest ?
Nirav and Mehul borrowed Rs.4000 and Rs.5000 respectively for 2.5 years at the rate of x% per annum. Mehul paid Rs 125 more interest than Nirav. Find x.
If the interest on a sum of Rs.1200 is more than the interest on Rs.1000 by Rs.120 in three years, then what is the rate of interest per annum?.
The difference between the simple interest received from two banks on Rs. 500 for two years is Rs. 2.50. What is the difference between their rates?
P borrowed an amount from Q at a simple interest of 10% p.a. At the end of the year, P paid back Rs 99000 which was 90% of what she owed. How much money did P borrow?
