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The period for which the borrower borrows the money is called time period and it is denoted by T.

The additional money paid by the borrower for using the lender’s money is called Interest. It is
denoted by I.
The Rate at which the principal amount is given to someone for a certain time is called the interest
rate. It is denoted by ‘R’.
It is written as R% per year or per annum (R % p.a.).

For example, the interest 10% p.a. means that for every `100 borrowed, `10 is the interest to be
paid for 1 year.
If interest is calculated uniformly on the original principal throughout the given period of time,
then the interest calculated is called the simple interest, abbreviated as S.I.
The terms simple interest and interest mean the same.

The sum of principal and simple interest is known as the amount.
That is Amount = Principal + Interest (or Simple Interest)

Consider the borrower will return the money at R% after T years, then at the end of T years, the
×
PR T
×
simple interest will be calculated by the given formula: S.I. =
100
Some other formulas are:
100 × SI.. 100 × SI 100 × SI..
.
(i) P = (ii) R = (iii) T =
RT PT PR
×
×
×
Example 24: A sum of `5000 is lent for 4 years at the rate of 8% per annum. Find the amount paid.
Solution: We have,
P = `5000, R = 8% p.a., T = 4 years

PR T 5000 84 Quick Check
××
×
×
Therefore, S.I. = = = 1600
100 100 Find the simple interest,
\ S.I. = `1600 if principal = `2,50,000,
rate = 7.5% p.a., and
Now, Amount = Principal + Simple Interest time = 18 months.
= `5000 + `1600 = `6,600
Thus, the amount paid is `6600.

Example 25: Salman deposits `10, 300 in the bank for 3 years at 6% p.a. rate of interest. Find the
amount he will receive from the bank at the end of the period.

Solution: P = `10,300, T = 3 years, R = 6% p.a.
×
PR T
×
We have, S.I. =
100
××
`10 300 63
,
=
100
Therefore, S.I. = `1854
Thus, the amount which Salman received = `10300 + `1854
= `12,154.

231 Percentage and Its Applications