Question & Answer

Find the amount to be paid at the end of 3 years when at 12% per annum?

ANSWER Verified Verified
Hint: Use a simple interest formula to determine the amount to be paid at the end of 3 years. Use the formula, $S.I=\dfrac{P\times R\times T}{100}$ to determine the interest. Add the obtained interest to the principal amount to determine the total amount to be paid.

Complete step-by-step solution -
We use simple interest to calculate the interest over a certain period of time that is to be repaid to the money lender along with the principal amount. Mathematically,$A=P+S.I$, where A is the total amount, P is the principal amount and S.I is the simple interest.
Let us denote the rate with ‘R’ and time with ‘T’. We have been given, $P=Rs.\text{ }1200,\text{ }R=12%\text{ and }T=3\text{ }years$.
Using the formula, $S.I=\dfrac{P\times R\times T}{100}$ and substituting the value of $P,R\text{ and }T$, we get,
  & S.I=\dfrac{1200\times 12\times 3}{100} \\
 & \text{ }=12\times 12\times 3 \\
 & \text{ }=432 \\
Therefore, the interest to be paid is Rs. 432.
Hence, the total amount to be paid after 3 years $=Rs.\text{ }(1200+432)=Rs.\text{ }1632$.

Note: Don’t get confused in using simple interest or compound interest, here, simple interest is used because the information provided is applicable for simple interest only. If we were to use compound interest then some additional information would have been provided to us in the question. Always remember that the borrower has to repay the principal amount along with the interest, so after finding the interest we must add it to the principal amount to get the total amount to be paid.