Question

Find the rate of interest if Rs.6000 amounts to Rs.7350 in 5 years.

Answer 1

Hint: The money lenders don’t lend money for free, to make some income for their own they apply interest on it to receive more money than they lent. The amount borrowed by the borrower is called the principal and is denoted by , the time for which the amount is borrowed is called the time period and is denoted by and the interest is a proportion of the principal amount that the borrower has to repay in addition to the principal amount and is denoted by . We know the required quantities to find out the rate of interest, thus it can be calculated using the formula to find interest.

Complete step-by-step answer:
Interest is calculated by the formula,
 $ I = \dfrac{{\Pr t}}{{100}} $ ,
where $ I = $ simple interest, $ r = $ interest, $ P = $ the amount borrowed (also called ‘Principal’ and $ t = $ time for which amount is borrowed.
We know the amount borrowed is Rs.6000 and the amount returned is Rs.7350. So, the total interest paid $ (I) $ will be equal to the difference between these two amounts,
 $
  I = 7350 - 6000 \\
   \Rightarrow I = Rs.1350 \;
  $
So, we get –
 $
  1350 = \dfrac{{6000 \times r \times 5}}{{100}} \\
   \Rightarrow r = \dfrac{{1350}}{{60 \times 5}} \\
   \Rightarrow r = 4.5\% \;
  $
Hence, the rate of interest is 4.5%.
So, the correct answer is “4.5%”.

Note: Interests are of two types:
Simple interest –
The interest that is calculated only on the amount taken and is the same for the annual period is called simple interest.
Compound interest:
In the case of compound interest, we calculate the interest for the first period and then add it to the amount borrowed, then calculate the interest for the next period using the new amount and so on.
In the given question, we have used the formula to find out the simple interest as we are simply asked to find out the rate of interest.