Question

Anita takes a loan of Rs.$5000$ at $15\% $ per year as rate of interest. Find the interest she has to pay at the end of one year.

Answer 1

Hint: Simple interest is a simple and easy method of calculating the interest charge on a loan. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments.
Interest is a process in which the amount of money borrowed (or lent) increases over time.
The amount borrowed is called Principal.
A Fixed Percentage of money is added to the principal at a regular time interval and that is called the rate of interest.

Simple interest is calculated using the following formula:-
Simple interest$ = \dfrac{{P \times r \times t}}{{100}}$
P $ = $Principal amount
r $ = $Annual interest rate
t $ = $term of loan in years

Complete step by step solution:
We have,
P$ = $ Rs. $5000$
r$ = $15
t$ = $one year
S.I. $ = \dfrac{{P \times r \times t}}{{100}}$
$
   = \dfrac{{5000 \times 15 \times 1}}{{100}} \\
   = 50 \times 15 \\
   = 750 \\
$

Hence, at the end of one year the interest she has to pay Rs. $750$.

Note: Do not confuse between simple interest and compound interest.
Simple interest is calculated on the principal or original amount of a loan.
Compound interest is calculated on the principal amount and also on the accumulated interest of Previous Periods and can thus be regarded as “Interest on Interest”.