Unit
MATHEMATICS FOR FINANCE
1
SIMPLE INTEREST
Interest and Definition of Interest
Interest is an attraction which inspire for saving. When a person of businessmen take any
amount for their requirement, they have to pay extra amount for using the money, this extra
money known as a Interest.
In other words, Interest = Amount Repaid - Principal
When the interest for the whole period is charged onlyReceived.
on the principal then the interest
is called Simple Interest.
The total amount interest may be fixed at the time of borrowing the money or its
be decided and then interest may be calculated on the basis of principal and time rate may
period.
Importance of Interest
Every person associated with the interest directly or indirectly. For example, employee
receive the interest on their provident fund and other deposite. Knowledge of interest is
necessary for every person otherwise he has to bear loss.
Types of Interest
(i) Simple Interest., (ii) Compound Interest.
If the word compound is not mentioned speciallywith the word interest' it refers to simple
interest only. Simple interest is always calculated on original principal whether interest is paid
during the period of loan or not.
Principal or Capital
The money taken as loan is called Principal or Capital. It is denoted by P.
Time
o0,0
The period for which the money is taken on loan, is called Time or Term. It is denoted by
T.
Rate of Interest
The rate at which the interest is charged on the principal is called Rate of Interest. It is
denoted by R. Generally it is expressed in terms of percentage per annum.
Amount
The sum of principal and the interest is called Amount. It is denoted by A.
Important Formulae
Amount (A) = Principal (P) + Interest (I)
PxRxT
(1) Simple Interest (S.I.) =
100
S.I. x 100
(2) Principal (P) = RxT
100 + A
P=
100 + R xT
S.I. x 100
(3) Time (T) = PxR
Rate of Interest (R) =
S.I. x 100
(4) PxT
Simple Interest 15
Interest Received Chetan 2,500 x 9 x 3
-t 675
100
where, P=t 2,500, R = 9, T=3
Interest Received Abhi = 1,500x 12 x 3 -t 540
100
where, P=t1,500, R = 12, T =3
Profit of Vivek =Total Int. Received -Total Int. Paid
= (675 + 540) - 720
=1,215 -20 * 495
EXERCISE )
To Find out Simple Interest
1. Compute the simple interest on 1,268 for 219 days at 6% per annum.
[Ans. 47.55]
2. Find the simple interest on 890 for 2 years at the rate of 2,% per annum.
[Ans, 44.50|
3. Find the simple interest on 300 for 7 years at 14% per annum.
[Ans. 294]
4. Calculate the interest on 10,824 for 8 months at the rate of 7.75% per annum. (Ans, 559.24]
To Find out Amount
5. Find the simple interest on T570 for 2 years at 3% p. a. What is the amount?
[Ans. 42.75; 612.75]
6. Calculate simple interest and amount after 2 years on * 285 at 3% per annum.
[Ans. 21.38; # 306.38]
7. ABank advancesT 7,850 for 7 months at the rate of 8% p. a. simple interest. What sum will have
tobe repaid at the end of the period ? [Ans. 8,239.23]
8. Asum of money amounts to 855 in 3 years at the rate of 4% p. a. simple interest. Find the
sum. (Ans. 750]
[Link] much investment is required to yield an annual income ofF 210 at 7% per annum simple
interest? [Ans. Principal =73,000]
To Find out Time
10. In how many years a sum of money doubles itself at 4% p. a. simple interest ? [Ans. 25 yearl
11. In what time will # 1,250 amount to 1,400 at 6% per annum ? [Ans. 2 year]
12. 12-% interest is tobe paid if an electricity bill is not deposited on time. Shanker's electricity bill
was for 350. He paid 1,600due to late payment. How many years after the bill was paid ?
[Ans. 28 years)
To Find out Rate
13. At what rate percent a sum of 350 will earn an interest of 42 after 3 years. [Ans. 4%)
14. Find the annual rate of simple interest ift 500 earned 55 as interest in 2 years and 9 months.
[Ans. 4%]
15. Find the simple interest on 10,200 fromn June 11, 2023 to November 4, 2023 at 12% per annum.
[Ans. Interest of 146 days =489.60)
16. Find the simple interest on 15,450 for 3 years 7 months and 73 days at 5% per annum. 1378
Ans. 2,916.45; T= 365
To Find out Principal and Rate
2,640 in 2 years and 3,000
I.A sumat certain rate per cent per annum simple interest becomes
in 5 years. Find the principal and rate of interest. [Ans. 5% p.a.]
16 SBPD Publications Business Mathematics and Statistics
IB8. Amit lent out a sum of moneyat a simple interest which amount to 2,880 in 2years and 3,600
in 5years, How much money was lent by Amit ?Find the rate of interest. [Ans, t 2,400, 10%1
9. Certain principal plus its 5years simple interest makes an amount oft 600. If theinterest is 1/5
of its principal, find out the rate of interest and the principal. [Ans. 4%, 500]
Miscellaneous Questions
0 Aperson borrowed t 6,400. After 2 vears and 3 months he paid 6,136 in cash with a horse and
cleared the amount. If the rate of interest was 31%
2 p. a., find the value of the horse.
[Ans. Cost of horse= Amount -Cash =6,904 -6,136 = 7681
Zl. Harish invested two equal sums and received interest on them @3%and 1% 4
[Link].
At the end of 18 months he received *510 as interest. What sum did he invest in all ?
[Ans. 6,800|
22. Ramesh gets interest at a certain rate on the investment ofF 2,000and 2% higher rate on the
investment oft 1,600. If he gets *996 at the end of 3years, find out the rate of interest.
(Ans. 8%)
23. If the number of years and the rate of interest are in the ratio 4:1 and the interest is 0.16times
[Ans. 2%; 8 years]
of the principal, find the rate of interest and the number of years.
24. Mr. Patel depositst 500 in a Bank, at the beginning of the first year, 530 at the beginning of
the second year and 550 at the beginning of the third year. The Bank pays 8% p.a. simple
interest. What will be the amount in his account at the end of third year ? [Ans. 1,828.80]
To Find out Principal
25. Find the sum on which as much interest is gained at 6% for 3years as is gained on 900 at 8%
for 2 years. [Ans. 800]
26. On a certain sum, a cderk calculated interest @5% per annum for 6months instead of @6%
per annum for 5 months. This resulted in a difference ofF 25. Find the sum. [Ans. 60,000]
To Find out Principal and Time
27. Two equal sums of moneyare lent at the same time at 6% per annum and 3% per annum at simple
interest respectively. The former is recovered 2 years earlier than the later, and the amount in
each case is 448. Find each sum and the time for which they are lent.
[Ans. Each Amount = 400, Time of First = 2 years, Time of Second = 4 years]
To Find out Time and Interest Rate
28. Simple interest on a certain sum is 16 of the principal. Find the interest rate percent and time
if both are equal. [Ans. 7, years, 7-%)
29. Acertain sum doubles itself after 20 years on simple interest. What will the amount be after 40
years ? [Ans. 5%;3 times]
30. Find the interest on 315 paise 50 for 83 days at 4 %per annum using third-tenth and tenth
rule. [Ans. 3.23)
To Find out Principal and Rate
31. Two equal sums were lent at simple interest for 4years and 3years respectively. The rate of
interest on the latter was 3% higher than that on the former, but the amount in each case was
{1,088. Find the sums and the rate. [Ans. 800; 9% p.a., 12% p.a.]
32. Three equal principals amount to 1,725 after 2, 3 and 4 years at 5% per annum. Find the
principal. [Ans. Each 500, Total Principal = 1,500]
Simple Interest 17
33. Neha deposited 3,000 on 1st June, 2023 in Co-operative Bank. She withdrew 1,000 on 8th
July and deposited E1,600 on 26th July. Again she withdrew* 1,000 on 6th August and deposited
*1,400 on 28rd August. Bank gives 6% interest per annum to his customer on deposited money.
What willbe the balance in the account of Neha on 318t August, 2023 including interest ?
(Ans. Int. 38 and Balance 4,038]
34. Aperson had 2,000. He lent out its one part for 6 years at 7% and the remainder for 3 years at
9% simple interest. He found that the interest on the first sum was double than on the second.
Find the two parts. [Ans. 1,125 and 875)
35. Acredit balance off 750 stands in current account of Sunil on 1st January, 2023. The Bank allows
interest at 4% per annum on each 30th June and 31st December and charges % as collection
charges. The Bank collect cheques ofT 250 and makes payment ofF 200 at the end of each month
for him. What balance will stand to the credit of his account on 30th June ? [Ans. 106.70]
36. Divide 2,348 in three parts in such a way that at the rate of 10% per annum their amounts are
equal after 3, 4 and 5 years. [Ans. T840, 780, 7 728]
37. A businessman borrowed 2,000 from two moneylenders. He paid 8% per annum to one
moneylender and 69% per annum to the other. How much sum he borrowed from each moneylender
if he paid total interest 131 for one year ? [Ans. 550 and 1,450]