Question

A farmer takes ₹10000 loan from a bank and pays back 28000 to the bank after 10 years. How much interest did the farmer have to pay to the bank?

Answer 1

Hint: In order to solve this question, students must know the concept of simple interest i.e.
Simple Interest = $\dfrac{{P \times R \times T}}{{100}}$. Also, Simple Interest = Amount – principal. Thus we get our desired answer.

Complete Step-by-Step solution:
Simple interest is the interest paid or computed on the original principle only of a loan or on the amount of an account. Formula of simple interest is given below-
 Simple Interest = Amount – principal
 Simple Interest = $\dfrac{{P \times R \times T}}{{100}}$
Given that Amount= 28000
 Principal= 10000
 Time= 10 years
Now we will calculate simple interest,
Simple interest = Amount-Principal
                                   =28000-10000
Simple interest =18000
Put the values of simple interest calculated, given time and given principle into the above mentioned formula-
$ \Rightarrow $ 18000=$\dfrac{{10000 \times R \times 10}}{{100}}$
$ \Rightarrow $ R= 18%
$\therefore $ The interest rate at which the farmer has to pay to the bank is 18%.

Note: In order to solve this question one can get confused with what formula to use between simple interest and compound interest so the concept should properly be understood. Most likely error done in this type of question is how to get simple interest by evaluating amount and principle.