A sum fetched a total Simple Interest of Rs. 4016.25 at the rate of 9% p.a. in 5 Years. What is the Sum?

A sum fetched a total Simple Interest of Rs. 4016.25 at the rate of 9% p.a. in 5 Years. What is the Sum?

To find the principal sum that fetched a total simple interest of Rs. 4016.25 at the rate of 9% per annum in 5 years, follow these steps

Simple Interest (SI) = Rs. 4016.25

Rate of Interest (R) = 9% per annum

Time (T) = 5 years

The formula for calculating simple interest is:

SI = (P x R x T)/100

Here, P is the principal amount

To find the principal amount (P), rearrange the formula

P = (SI x 100)/R x T

Substituting the values

P = (4016.25 x 100)/9 x 5

P = 401625/45 = 8925

Therefore, the principal amount that fetched a total simple interest of Rs. 4016.25 at the rate of 9% per annum in 5 years is Rs. 8925.

Simple Interest and Principal Amount

Simple interest is a method used to calculate the interest charged or earned on a principal amount over a specific period at a given rate. The formula for simple interest is

SI = (P x R x T)/100

where

SI is the simple interest,

P is the principal amount,

R is the rate of interest per annum, and

T is the time in years.

Each component in the simple interest formula plays a crucial role. The principal amount (P) is the initial sum of money that is either invested or borrowed. The rate of interest (R) is expressed as a percentage and indicates how much interest is charged or earned per year. The time (T) is the duration for which the money is invested or borrowed, measured in years.

Calculating Principal Amount:

To find the principal amount when the simple interest, rate, and time are known, we can rearrange the formula. By changing

P = (SI x 100)/R x T

This formula allows us to determine the original sum of money that, when subjected to a specified rate of interest over a certain period, results in the given simple interest.

Key Points

Learning how to calculate simple interest and the principal amount is a fundamental aspect of financial literacy. It equips you with the skills to solve real-world financial problems, make informed decisions about savings and loans, and understand the implications of interest rates over time.

Applications

This concept is widely used in finance and banking. When individuals or businesses take out loans or make investments, understanding how to calculate the principal amount helps them manage their finances better. It is a practical skill that individuals use throughout their lives to manage money effectively.