Simple Interest

The students and the candidates of the Government competitive exam are more often asking their teachers and instructors what is simple interest to know the simple interest in an effective way. In order to solve the problems related to the simple interest, the students need to understand the philosophy behind the simple interest and its real-life uses. They can easily understand the concept by focusing on real-life examples that are generally seen in the banking and insurance sectors. The amount of simple interest can be easily calculated by the multiplication of the principal amount with the rate of simple interest and the time (in years) as mentioned in the problem. After multiplication, the learners have to divide the final result of the multiplication by one hundred.

Overview on Simple Interest

For an effective understanding of the concept of simple interest, suppose a man borrows 1000 rupees from a bank and the rate of interest is 12 per cent per annum then that man has to pay 1120 rupees after one year and 1240 rupees after 2 years. In the mentioned example, the learners can calculate the amount of interest for one year by multiplication of the total principal amount 1000 with 12 per cent. They can also find the amount of interest for the 2 or more years by multiplying the interest of one year by the number of years. Moreover, it has been cleared from the mentioned example that the simple interest can be calculated by the rule of percentage.

Definition of Simple Interest

The definition of the simple interest can be effectively described in the terms of the interest rate and formula. More often the scholars of the contemporary world define the simple interest by the concept of borrowing money and this is an effective approach taken by the scholars to assist the learners in understanding the concept related to the simple interest. They can introduce the example of real-life so that the learner understands the concept of the simple interest. Furthermore, for instance, they are using the concept of borrowing from the lender companies or the bank that are effectively understandable by the learners. The terminology simple interest can be defined as an extra charge that has to be paid by a borrower after a certain time. The learners can calculate the rate of interest by using simple formulas related to the problems of percentage.

Simple Interest Formulas

The simple interest formula can help the learners to understand the concept and philosophy behind borrowing and simple interest. In order to calculate the accrued amount or final amount, the learners have to follow the formula X = Y (1 + (P*O)), where X is the accrued amount, Y is the principal amount, P is the rate of interest and O is the time period. They can use this formula to calculate the rate of interest and also have to keep in mind the fact related to the principal amount and accrued amount that the interest amount can be found by subtraction of principal amount from the accrued amount. Furthermore, the simple interest formula becomes SI = X – Y, where x is the accrued amount and Y is the principal amount. In order to solve the problems regarding simple interest, the learners have to understand the relationship of the various terminologies that are used in the accrued amount formula and simple interest formula.

Discussion on Simple Interest

In order to solve the problems regarding the accrued amount that is made by the inclusion of simple interest, the learners have to understand the concept behind the principal and accrued amount. The complexity of the problems related to the principal or accrued amount can be enhanced by the inclusion of a different parameter of the time instead of per annum. For instance, a man borrows 1000 rupees for 1 year and the rate of interest is 12 percent per 3 months. In this case, the learners can calculate the interest amount by knowing the philosophy of simple interest. They can calculate for 3 months first and it is 120 rupees and multiply it with four to get the simple interest of one year. Moreover, it has not been exaggerated to say that to solve the aforementioned problems the learners have to focus on their calculation speed and its correction and to understand the concepts and relationship among other terms by remembering the simple interest formula.

Conclusion

The complexity of the problems regarding the accrued amount and simple interest can be enhanced by the inclusion of fraction and decimal numbers instead of using integers, in this case, learners have to focus on the calculation in order to solve such kinds of problems. The calculation speed matters in order to solve such kinds of problems, so the learners have to improve their calculation so that they can get an error-free solution of the problems related to the simple interest.