Simple Interest (S.I.)

The topic of discussion in this study is Simple Interest or S.I. and it is considered to be an important part of mathematical calculation. The calculative part of this study that defines the aspect of SI is the method of calculating the interest. There is a particular formula that helps in the calculation of SI and also helps in calculating the amount of interest. In this study, the calculation of Simple Interest, its SI unit of it, and an example of this interest will be described. 

Simple Interest (S.I.)

Simple Interest or SI is an easy method of calculation of interest and it is for a principal amount of money or a loan. The concept of Simple Interest has been used in many sectors like finance, banking, automobile and many more. Generally, it can be seen that when one person borrows money, then he has to return it. In the same way, when one person borrows money from banks in the form of a loan, then he has to return it with an amount of interest, and this is called simple interest.      

Simple Interest Formula

Simple interest acquires a formula and it helps to find the amount of interest. This formula is only applicable for calculation when the rate of interest, principal amount, and period is given. The formula of SI is:

SI = PTR/100

In this formula SI means Simple Interest, P means Principle, R means the rate of interest, and T means the duration of time. Here the interest rate is presented in percentages, the time duration is presented in years. In the case of calculation of the total amount, a formula is used and it is:

Amount (A) = Principle (P) + Interest (I) 

Here A is the total amount of money that has been paid at the end of the period. 

Simple Interest calculation

Calculation of simple interest goes only to the calculation I = PRT and it is seen that simple interest does not include the compound interest effect. Simple interest bears the formula-

I = Prt

In this field, I = amount of interest, P = Principle amount, R = interest rate per year as a per cent, r = interest rate per year in decimal, t = time. A calculator or calculation for simple interest presents P as a principal amount of money that is invested in a rate of interest R% per annum, and T stands for the time.  

What is the SI unit of Simple Interest?

In the calculation of SI PRT is the important part and here P refers to Principal, R refers to the rate of interest, and T refers to time. The amount of money that has been deposited is called Principle, the principle generates money and it is called interest. It can be seen that simple interest is calculated on the principal amount, and it is not calculated on the cumulative amount. The formula of simple interest (SI) = P*R*T/100 and in this field Final Amount = Principal + SI. This is the calculative part of Simple Interest and it helps to calculate the part of interest.     

Difference between Simple Interest and Compound Interest

• Simple interest is an easy method whereas compound interest is difficult in nature
• The formula of compound interest is (1+Rate/100)n – Principle
• The formula of simple interest is (P*R*T)/100
• Simple interest is different from Compound interest

In this field of study, it can be defined that compound interest is an interest that is calculated on the principle and in the interest that is accumulated over a previous time. 

Example of SI

In maths the formula of simple interest helps in the calculation of SI. an example can be given:

Amit obtains a loan from the bank in the amount of 20000 for a 1-year periodic time. The interest rate for it is 10% per annum. Find the amount and interest that Amit has to pay at year-end. 

Solution:

Here, the sum of loan (P) = 20000

Interest rate per annum (R) = 10%

Time (T) = 1 year

Then, SI will be (P*R*T)/100

(20000*10*1)/100 = 2000

The amount of money that Amit has to pay at year-end is = P + I= 20000+2000 = 2200    

Conclusion

This field of study is about the Simple Interest or SI and it is an important part of the mathematical field. The formula that is presented in this study helps in the calculation of borrowed money from the Banks. It is also very helpful for other aspects and this study gives the difference between compound and simple interest here. It helps to define that SI is an easy process of calculation. This study provides a clear description of the aspect of simple interest. Another interesting part of this study is that it discusses the difference between Simple Interest and Compound Interest.