Question

Mohan has a recurring deposit account in a bank for $2$ years at $6\% $ p.a. simple interest. If he gets Rs. $1200$ as interest at the time of maturity, find the monthly instalment (in Rs.).

Answer 1

Hint: Simple interest is an interest amount money for a principal amount at some interest for a particular time. The formula for simple interest is $SI = \left( {\dfrac{{principal \times rate \times time}}{{100}}} \right)$. Using this formula, we will find the monthly instalments.

Complete step-by-step solution:
Given:
Rate of interest : $6\% $ p.a.
Time = $2$ years = $2 \times 12 = 24$ months. ($1$ year = $12$ months)
Since, Mohan is getting the money after maturity i.e., after $24$ months, so the total time will be $24 + 1 = 25$ months.
Interest amount = $SI = Rs.1200$
We need to find the principal amount i.e., the monthly instalments paid in Rs.
Using the simple interest formula,
$SI = \left( {\dfrac{{principal \times rate \times time}}{{100}}} \right)$
We will substitute all the given values in this formula,
$1200 = \dfrac{{principal \times 6 \times 25}}{{100}}$
Rearranging the terms,
$principal = \dfrac{{1200 \times 100}}{{6 \times 25}}$
Simplifying the terms,
$principal = 200 \times 4$
Multiplying the numbers,
$principal = 800$
Therefore, the principal amount to be paid monthly is $Rs.800$.

Note: Simple interest is a clean method of calculating the interest for a loan/major quantity. Simple interest is an idea that is used in a maximum of the sectors together with banking, finance, car, and so on. While you make a fee for a mortgage, first it is going to the monthly hobby and the last is going toward the primary amount. The primary difference between simple and compound interest is that easy interest is primarily based on the most important amount of a deposit or a loan while compound interest is based totally on the primary quantity and interest that accumulates in each time period.