The interest earned on Rs. 1,600 at the rate of 5% simple interest per annum for 6 years would be:
Rs. 480
This question asks us to calculate the simple interest earned on a specific principal amount over a certain period at a given annual interest rate. Understanding how simple interest works is fundamental in finance.
Understanding Simple Interest Calculation
Simple interest is calculated only on the principal amount. It does not compound, meaning the interest earned in previous periods is not added to the principal for calculating interest in the current period.
The formula for simple interest is:
\( \text{Simple Interest (SI)} = \frac{\text{Principal (P)} \times \text{Rate (R)} \times \text{Time (T)}}{100} \)
Where:
- Principal (P): The initial amount of money borrowed or invested.
- Rate (R): The annual interest rate (expressed as a percentage).
- Time (T): The duration for which the money is borrowed or invested (in years).
Applying the Simple Interest Formula
In this problem, we are given the following information:
- Principal amount (P) = Rs. 1,600
- Rate of interest (R) = 5% per annum
- Time period (T) = 6 years
We need to find the Simple Interest (SI) earned.
Step-by-Step Simple Interest Calculation
Let's substitute the given values into the simple interest formula:
\( \text{SI} = \frac{1600 \times 5 \times 6}{100} \)
Now, let's perform the calculation:
First, multiply the numbers in the numerator:
\( 1600 \times 5 = 8000 \)
\( 8000 \times 6 = 48000 \)
So the formula becomes:
\( \text{SI} = \frac{48000}{100} \)
Now, divide by 100:
\( \text{SI} = 480 \)
Therefore, the simple interest earned is Rs. 480.
Comparing with Options
Let's look at the provided options:
- Option 1: Rs. 469
- Option 2: Rs. 2,080
- Option 3: Rs. 480
- Option 4: Rs. 450
Our calculated simple interest is Rs. 480, which matches Option 3.
Summary of Simple Interest Problem
To find the simple interest, we identified the principal, rate, and time and applied the standard formula \( SI = (P \times R \times T) / 100 \). The calculation led us to the result of Rs. 480 as the interest earned over 6 years.
Revision Table: Simple Interest Concepts
| Term | Definition | Unit |
|---|---|---|
| Principal (P) | Initial amount invested or borrowed | Currency (e.g., Rs.) |
| Rate (R) | Annual interest rate | Percentage (%) |
| Time (T) | Duration of investment/loan | Years |
| Simple Interest (SI) | Interest calculated only on the principal | Currency (e.g., Rs.) |
Additional Information on Interest Calculations
While simple interest is straightforward, another common type is compound interest. Compound interest is calculated on the principal amount and also on the accumulated interest from previous periods. This means that the principal amount grows over time, and the interest earned subsequently also grows, leading to faster growth of the investment or debt compared to simple interest.
Key differences include:
- Simple Interest: Interest is constant every year (based on the original principal).
- Compound Interest: Interest increases each year (based on principal + accumulated interest).
Understanding the distinction between simple and compound interest is crucial for personal finance, investments, and loans.
Similar Questions
The simple interest earned on a certain sum of money for 3 years at 15% per annum is ₹2,700. Find the sum.
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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?
