Question

Sunita takes a loan of Rs. 5000 at 12% rate of interest. Find the interest she has to pay at the end of the year.

Answer 1

Hint: Here we will proceed by using the formula of simple interest to calculate the interest she has to pay at the end of the year.
Simple interest is the interest calculated on the principal portion of a loan.
Formula of simple interest$ = \dfrac{{P \times R \times T}}{{100}}$
Where,
P is principal amount
R is rate of interest
T is the time period.

Complete step-by-step answer:
Here we are given that,
Principal = 5000
Rate of interest = 12%
Time = 1 year
Now we will apply the formula of simple interest,
Simple interest $ = \dfrac{{P \times R \times T}}{{100}}$
Simple interest $ = \dfrac{{5000 \times 12 \times 1}}{{100}}$
Simple interest = 600
Therefore, Sunita has to pay Rs. 600 as interest.

Note: In order to solve this type of question, we must understand why we used simple interest instead of compound interest. We used the formula of simple interest because the question is based on the principal amount of a loan and not on the interest that accumulated every period.