Question:
How much loan did Timothy borrow 5 years ago at a rate of simple interest 2% per annum, if he paid $8140 to clear it?
Correct Answer
$7400
Solution And Explanation
Solution
Given,
Amount (A) = $8140
Rate of Simple Interest (R) = 2%
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
$8140 = P (1 + 2% × 5)
⇒ $8140 = P (1 + 2/100 × 5)
⇒ $8140 = P (1 + 2 × 5/100)
⇒ $8140 = P (1 + 10/100)
⇒ $8140 = P (100 + 10/100)
⇒ $8140 = P × 110/100
⇒ P × 110/100 = $8140
⇒ P = 8140/110/100
⇒ P = 8140 × 100/110
⇒ P = 8140 × 100/110
⇒ P = 814000/110
⇒ P = $7400
Thus, the sum borrowed (P) = $7400 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 = 2% per annum
Thus, Interest = 2% of principal
⇒ Interest = 2% of 100 = 2
Thus, Simple Interest for 1 year = 2
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 × 2 = 10
Thus, simple interest for 5 years = 10
Thus, Amount (A) = Principal + Interest
⇒ Amount = 100 + 10 = 110
Calculation of the Principal
Now,
∵ If the Amount is 110, then the Principal = 100
∴ If the Amount is 1, then the Principal = 100/110
∴ If the Amount is 8140, then the Principal = 100/110 × 8140
= 100 × 8140/110
= 814000/110
= 7400
Thus, Principal = $7400
Thus, the sum borrowed = $7400 Answer
Similar Questions
(1) If Barbara paid $4260 to settle his loan which he had taken 4 years before at a simple interest of 5%, then find the loan taken.
(2) Calculate the amount due after 9 years if Mary borrowed a sum of $5050 at a rate of 10% simple interest.
(3) What amount does Mary have to pay after 5 years if he takes a loan of $3050 at 2% simple interest?
(4) Karen took a loan of $5900 at the rate of 10% simple interest per annum. If he paid an amount of $10620 to clear the loan, then find the time period of the loan.
(5) In how much time a principal of $3150 will amount to $3622.5 at a simple interest of 3% per annum?
(6) Find the amount to be paid if Jennifer borrowed a sum of $5250 at 10% simple interest for 7 years.
(7) What amount does Mary have to pay after 5 years if he takes a loan of $3050 at 7% simple interest?
(8) John had to pay $3392 in order to furnish the loan taken 3 years before. If the rate of simple interest was 2% then find the sum borrowed.
(9) Elizabeth took a loan of $4900 at the rate of 10% simple interest per annum. If he paid an amount of $8330 to clear the loan, then find the time period of the loan.
(10) Find the amount to be paid if Jennifer borrowed a sum of $5250 at 6% simple interest for 8 years.