Page 122 - ICSE Math 7

10 Simple Interest

Key Concept

• Simple Interest

In this chapter, we will learn about simple interest and its related terms which are principal, rate of
interest, time period and amount.

Simple Interest

When we borrow money from a bank or a money lender for a certain period of time, then while returning
money, we have to pay extra money along with the money borrowed. This additional money paid
for using the borrowed money is known as simple interest or interest (S.I.). The money borrowed
is known as principal (P) and the period for which the money is borrowed is known as time (T).
The fixed percentage at which interest is calculated for a certain period of time is known as rate of
interest (R) and the sum of principal and interest is known as amount (A). So, Amount (A) = P + S.I.
Also,
Principal × Rate of interest × Time
Simple Interest = 100 Maths Info
P × R × T
or, S.I. = Rate of interest is the interest
100 on every ` 100 for a fixed time
Simple interest S.I. period.
Principal = or P =
Rate of interest × Time R × T
Simple interest S.I.
Time = or T =
Rate of charge × Principal R × P
Simple interest S.I.
Rate of interest = or R% =
Principal × Time P × T

Point to remember
Time is always taken according to rate of interest. When rate of interest is given per month, then time
should be in months and if rate of interest is in years, then time should be in years.

Example 1: Find the simple interest on a loan of ` 25,000 at the rate of 7% per year for 3 years.
Solution: P = ` 25,000, R = 7% per year and T = 3 years
P × R × T 25,000 × 7 × 3
S.I. = = = ` 5,250
100 100
Example 2: Find the amount to be paid on a loan of ` 6,600 at the rate of 8% per annum at the end
of 5 years.
Solution: P = ` 6,600, R = 8% per annum and T = 5 years
P × R × T
S.I. =
100
6,600 × 8 × 5
= = ` 2,640
100

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