Calculating the Rate of Simple Interest per Annum

The concept of simple interest is fundamental in understanding various financial transactions and investments. In this article, we will explore how to calculate the rate of interest per annum using the formula for simple interest. Specifically, we will delve into the process of determining the rate of interest when a principal amount of Rs 100 produces a total amount of Rs 900 over a period of 5 years.

Understanding Simple Interest

Simple interest is a type of interest that is calculated on the original principal for the entire duration of the loan or investment. The formula for calculating simple interest is given by:

SI P times; R times; T}{100} SI Simple Interest P Principal Amount R Rate of Interest per annum T Time in years

Problem Statement

We are given a principal amount of Rs 100 that produces a total amount of Rs 900 in 5 years. Our task is to find the rate of interest per annum.

Step-by-Step Solution

Determine the Simple Interest Amount:

First, we need to find the simple interest earned. This can be calculated as follows:

SI Total Amount - Principal

Given:

Principal (P) Rs 100 Total Amount Rs 900

Therefore:

SI 900 - 100 800 Substitute the Values into the Formula:

Now, we substitute the values into the simple interest formula:

800 100 times; R times; 5}{100} Simplify and Solve for R:

To solve for the rate R, we simplify the equation:

800 R times; 5

Dividing both sides by 5:

R 800}{5} 160

Hence, the rate of interest per annum is 160%.

Conclusion

By following the steps outlined above, we have successfully calculated the rate of interest per annum for a given principal amount. This method can be applied to a wide range of financial scenarios to determine the interest rate, making it a valuable tool for both students and professionals in the financial sector.

Additional Resources for Further Learning

For those looking to deepen their understanding of simple interest and its applications, consider exploring the following topics:

Simple Interest Formulas and Applications Compound Interest vs Simple Interest Finding Principal and Time Using Simple Interest

Understanding these concepts is crucial for managing personal finances and making informed investment decisions.