Class 5th to competition|| SIMPLE INTEREST || (साधारण ब्याज)-01 || All Govt Exams || BY Jitendra sir

Class 5th to competition|| SIMPLE INTEREST || (साधारण ब्याज)-01 || All Govt Exams || BY Jitendra sir

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What is Simple Interest?


Simple Interest (S.I) is the method of calculating the interest amount for some principal amount of money. Have you ever borrowed money from your siblings when your pocket money is exhausted? Or lent him maybe? What happens when you borrow money? You use that money for the purpose you had borrowed it in the first place. After that, you return the money whenever you get the next month’s pocket money from your parents. This is how borrowing and lending work at home.

But in the real world, money is not free to borrow. You often have to borrow money from banks in the form of a loan. During payback, apart from the loan amount, you pay some more money that depends on the loan amount as well as the time for which you borrow. This is called simple interest. This term finds extensive usage in banking.

Simple Interest Formula
The formula for simple interest helps you find the interest amount if the principal amount, rate of interest and time periods are given.

Simple interest formula is given as:




Where SI = simple interest

P = principal

R = interest rate (in percentage)

T = time duration (in years)

In order to calculate the total amount, the following formula is used:

Amount (A) = Principal (P) + Interest (I)

Where,

Amount (A) is the total money paid back at the end of the time period for which it was borrowed.

The total amount formula in case of simple interest can also be written as:

A = P(1 + RT)

Here,

A = Total amount after the given time period

P = Principal amount or the initial loan amount

R = Rate of interest (per annum)

T = Time (in years)