Question

Find the simple interest on Rs. 2000 at 5% per annum for 2 years.

Answer 1

- Hint: Try to recall the basic definition of simple interest and use the formula of simple interest which is equal to the rate of interest multiplied by time period multiplied by principal amount.

Complete step-by-step solution -

Before starting with the question, let us know about interest.
Interest in the financial term is the amount that a borrower pays to the lender along with the repayment of the actual principal amount.
Broadly, there are two kinds of interest, first is the simple interest, and the other is the compound interest.
Now moving to the solution of the above question, we know that simple interest is equal to the rate of interest multiplied by time period multiplied by principal amount. This can be mathematically represented as:
$i=P\times r\times t$
For our question, we know P is Rs. 2000, while rate is 5%, i.e., $\dfrac{5}{100}$ and the time period is given to be 2 years. Therefore, if we put the values in our formula of simple interest, we get
$i=2000\times \dfrac{5}{100}\times 2=200$
Therefore, the simple interest for the situation given in the question is Rs. 200.

Note: Don’t get confused and take 2000 to be the principal amount. Also, be careful with the calculations and solving part as there is a possibility of making a mistake in the calculations. It is recommended to learn all the basic formulas related to simple as well as compound interests as they are very much useful in the problems related to money exchange. Don’t get confused between the formulas $P\times r\times t\text{ and }\dfrac{\text{P}\times \text{r}\times \text{t}}{100}$ , both are same thing in the first one you can put r in any form, i.e., percent, ratio etc, while in the second formula, you need to put the value of r in percent only.
Another thing you should remember is the formula of compound interest $i=P{{\left( 1+r \right)}^{t}}-P$ .