what is simple interest?

Asked by archanagoel23 | 6th Dec, 2015, 05:15: PM

Expert Answer:

S u p p o s e space y o u space a r e space h a v i n g space R s.100 space a n d space y o u space w a n t space t o space p u t space t h a t space m o n e y space i n space s a v i n g s space b a n k space a c c o u n t. A s s u m e space t h a t space t h e space b a n k space i s space p r o v i d i n g space 6 percent sign space s i m p l e space i n t e r e s t. T h a t space m e a n s space b a n k space i s space g i v i n g space y o u space e x t r a space m o n e y space f o r space k e e p i n g space y o u r space m o n e y space i n space t h e space b a n k. 6 percent sign space m e a n s space 6 over 100 T h u s comma space f o r space R s.100 comma space t h e space b a n k space w i l l space g i v e space y o u space R s.6 space a s space t h e space i n t e r e s t space a t space t h e space e n d space o f space o n e space y e a r. S o space a f t e r space o n e space y e a r space w h e n space y o u space a r e space w i t h d r a w i n g space y o u r space m o n e y comma space y o u space w i l l space g e t space R s.6 space a s space a d d i t i o n a l space i n t e r e s t space a l o n g space w i t h space R s.100 T h i s space 6 space r u p e e s space i s space t h e space i n t e r e s t space t h a t space y o u space a r e space g e t t i n g space a n d space t h e space t o t a l space a m o u n t space i s space e q u a l space t o space R s.100 plus R s.6 equals R s.106 A n d space t h e space i n t e r e s t space r a t e comma space R equals space 6 percent sign space s i m p l e space i n t e r e s t. P space i s space t h e space p r i n c i p a l space a m o u n t space t h a t space y o u space i n v e s t e d space i n space t h e space b a n k. N space i s space t h e space n u m b e r space o f space y e a r s space t h a t space y o u space a r e space h o l d i n g space t h e space m o n e y space i n space t h e space b a n k. T h e r e f o r e comma space u sin g space f o r m u l a comma space w e space h a v e comma S i m p l e space i n t e r e s t equals fraction numerator P N R over denominator 100 end fraction A m o u n t equals P r i n c i p a l plus S i m p l e space I n t e r e s t I n space o u r space c a s e space S i m p l e space I n t e r e s t equals fraction numerator 100 cross times 1 cross times 6 over denominator 100 end fraction equals R s.6 A m o u n t equals R s.100 plus R s.6 equals R s.106

Answered by Vimala Ramamurthy | 7th Dec, 2015, 10:56: AM