Simple And Compound Interest

CLASS NOTES
CLASS : 8
SUBJECT : MATHEMATICS
CHAPTER :SIMPLE AND COMPOUND INTEREST


Contents

SIMPLE AND COMPOUND INTEREST

Simple Interest (S.I.)
• Principal (P): The original amount of money borrowed or invested.
• Interest (I): The extra money paid by the borrower to the lender for using the principal.
• Amount (A): The total money returned by the borrower, i.e.,

A=P+I

• Rate of Interest (R): The interest charged per 100 units of principal for a given time period.
• Time (T): The duration for which the money is borrowed or invested.
• Simple Interest Formula:
P×R×T
I=
100
• Amount Formula:
R×T
 
A=P+I =P 1+
100

, Example 1
Find the simple interest on |12,500 at 8% per annum for 2 years 6 months. Also find the total
amount.
Solution:
6
P = 12500, R = 8%, T = 2 + = 2.5 years
12
12500 × 8 × 2.5
I= = 2500
100
A = P + I = 12500 + 2500 = 15000

Example 2
A sum of money amounts to |8,400 in 3 years at 7% per annum simple interest. Find the
principal.
Solution:
A = 8400, R = 7%, T = 3
I = A − P =⇒ I = 8400 − P
P×R×T P×7×3
I= =⇒ 8400 − P =
100 100
8400
8400 − P = 0.21P =⇒ 8400 = 1.21P =⇒ P = ≈ 6942.15
1.21

Example 3
A man lends |9,600 at 6% per annum simple interest. How long will it take for the interest to
amount to |1,728?
Solution:
P = 9600, R = 6%, I = 1728
I × 100 1728 × 100
T= = = 3 years
P×R 9600 × 6

Homework: Simple Interest
Problems
1. Find the simple interest on |12,000 at 8% per annum for 3 years.
2. A sum of money lent at 5% per annum simple interest amounts to |1,260 in 2 years. Find
the principal.