Interest Formula

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If the Principal amount, rate of interest and time period is known, then the simple interest can be calculated using the interest formula,

                             I = P * T * R / 100

Here P is the principal amount over which interest is to be calculated 

T is the time period in years

R is the annual rate at which interest is calculated

This formula is used for calculating the interest on a loan taken.

 
Example -1: Find the total amount of simple interest that is paid over a period of 5 years on a principal of $ 30,000 at a simple interest rate of 6%.

Solution: We are given P = $ 30,000

                                       R = 6 %

                                       T = 5 yrs

We can calculate the simple interest using the interest formula.

             I = P * T * R / 100

 Now we put the values in the formula we get,

             I = 30,000 * 5 * 6 / 100

             I = 900,000 / 100

             I = 9000

Thus the interest on the given amount is $ 9000.
        

Example 2:   Find the simple interest on $ 10,000 at the rate of 5% for 3 years.

Solution:   It is given that the Principal = $ 10,000       Rate = 5 %     Time = 3 year
The interest formula is I = P * T * R / 100
 
On putting the values in the interest formula and solving,

            I = 10,000 * 5 * 3 / 100

            I = 150, 000 / 100

            I = 1500

Thus we get an interest of $ 1500 on the given principal amount.




 

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