Simple Interest
Math MCQs

Question :    How much loan did Andrew borrow 5 years ago at a rate of simple interest 5% per annum, if he paid $8500 to clear it?

Correct Answer  $6800

Solution & Explanation

Solution

Given,

Amount (A) = $8500

Rate of Simple Interest (R) = 5%

Time (T) = 5 years

Thus, Principal (P) = ?

Method (1) Using Formula

Calculation of the Principal using forumula when Amount, Time and Rate of Simple Interest are given

Formula to find the Principal (P)

Amount (A) = Principal (P) + Principal (P) × Rate (R) × Time (T)

⇒ Amount (A) = Principal (P) [1 + Rate (R) × Time (T)]

⇒ A = P (1 + RT)

Using the formula to find the Amount (A), the fourth can be calculated if any three of A, P, R, and T are given

In the given question, we need to find the Principal (P)

Therefore, by substituting, Amount, Rate, and Time, in the formula A = P (1 + RT) we get

$8500 = P (1 + 5% × 5)

⇒ $8500 = P (1 + ⁵/₁₀₀ × 5)

⇒ $8500 = P (1 + ^{5 × 5}/₁₀₀)

⇒ $8500 = P (1 + ²⁵/₁₀₀)

⇒ $8500 = P (^{100 + 25}/₁₀₀)

⇒ $8500 = P × ¹²⁵/₁₀₀

⇒ P × ¹²⁵/₁₀₀ = $8500

⇒ P = ⁸⁵⁰⁰/_¹²⁵/100

⇒ P = 8500 × ¹⁰⁰/₁₂₅

⇒ P = ^{8500 × 100}/₁₂₅

⇒ P = ⁸⁵⁰⁰⁰⁰/₁₂₅

⇒ P = $6800

Thus, the sum borrowed (P) = $6800 Answer

Method (1) Using Unitary Method

Calculation of the Principal using unitary method when Amount, Time and Rate of Simple Interest are given

Calculation of the Simple Interest

Let, the principal = 100

Here, since rate of simple interest = 5% per annum

Thus, Interest = 5% of principal

⇒ Interest = 5% of 100 = 5

Thus, Simple Interest for 1 year = 5

Calculation of the Amount

Since, in the question, time = 5 years

So, we need to calculate the simple interest for the given time period, which is 5 years

Thus, Simple Interest for 5 years = 5 × Simple Interest for 1 year

= 5 × 5 = 25

Thus, simple interest for 5 years = 25

Thus, Amount (A) = Principal + Interest

⇒ Amount = 100 + 25 = 125

Calculation of the Principal

Now,

∵ If the Amount is 125, then the Principal = 100

∴ If the Amount is 1, then the Principal = ¹⁰⁰/₁₂₅

∴ If the Amount is 8500, then the Principal = ¹⁰⁰/₁₂₅ × 8500

= ^{100 × 8500}/₁₂₅

= ⁸⁵⁰⁰⁰⁰/₁₂₅

= 6800

Thus, Principal = $6800

Thus, the sum borrowed = $6800 Answer

Similar Questions

(1) Thomas took a loan of $5600 at the rate of 9% simple interest per annum. If he paid an amount of $10640 to clear the loan, then find the time period of the loan.

(2) Thomas had to pay $4028 in order to furnish the loan taken 3 years before. If the rate of simple interest was 2% then find the sum borrowed.

(3) How much loan did Elizabeth borrow 5 years ago at a rate of simple interest 5% per annum, if he paid $6812.5 to clear it?

(4) In how much time a principal of $3100 will amount to $3286 at a simple interest of 2% per annum?

(5) What amount does David have to pay after 5 years if he takes a loan of $3400 at 10% simple interest?

(6) Find the amount to be paid if William borrowed a sum of $5500 at 9% simple interest for 7 years.

(7) What amount will be due after 2 years if Robert borrowed a sum of $3050 at a 7% simple interest?

(8) If Donald paid $5220 to settle his loan which he had taken 4 years before at a simple interest of 4%, then find the loan taken.

(9) Calculate the amount due if Joseph borrowed a sum of $3700 at 10% simple interest for 4 years.

(10) Find the amount to be paid if Mary borrowed a sum of $5050 at 10% simple interest for 7 years.