Question:
How much loan did Kenneth borrow 5 years ago at a rate of simple interest 3% per annum, if he paid $8050 to clear it?
Correct Answer
$7000
Solution And Explanation
Solution
Given,
Amount (A) = $8050
Rate of Simple Interest (R) = 3%
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
$8050 = P (1 + 3% × 5)
⇒ $8050 = P (1 + 3/100 × 5)
⇒ $8050 = P (1 + 3 × 5/100)
⇒ $8050 = P (1 + 15/100)
⇒ $8050 = P (100 + 15/100)
⇒ $8050 = P × 115/100
⇒ P × 115/100 = $8050
⇒ P = 8050/115/100
⇒ P = 8050 × 100/115
⇒ P = 8050 × 100/115
⇒ P = 805000/115
⇒ P = $7000
Thus, the sum borrowed (P) = $7000 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 = 3% per annum
Thus, Interest = 3% of principal
⇒ Interest = 3% of 100 = 3
Thus, Simple Interest for 1 year = 3
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 × 3 = 15
Thus, simple interest for 5 years = 15
Thus, Amount (A) = Principal + Interest
⇒ Amount = 100 + 15 = 115
Calculation of the Principal
Now,
∵ If the Amount is 115, then the Principal = 100
∴ If the Amount is 1, then the Principal = 100/115
∴ If the Amount is 8050, then the Principal = 100/115 × 8050
= 100 × 8050/115
= 805000/115
= 7000
Thus, Principal = $7000
Thus, the sum borrowed = $7000 Answer
Similar Questions
(1) Jessica took a loan of $5500 at the rate of 6% simple interest per annum. If he paid an amount of $8140 to clear the loan, then find the time period of the loan.
(2) What amount does Barbara have to pay after 5 years if he takes a loan of $3550 at 5% simple interest?
(3) What amount will be due after 2 years if Matthew borrowed a sum of $3600 at a 9% simple interest?
(4) In how much time a principal of $3100 will amount to $3720 at a simple interest of 5% per annum?
(5) Calculate the amount due if Elizabeth borrowed a sum of $3450 at 10% simple interest for 3 years.
(6) Find the amount to be paid if Robert borrowed a sum of $5100 at 10% simple interest for 8 years.
(7) What amount does Elizabeth have to pay after 6 years if he takes a loan of $3450 at 9% simple interest?
(8) Calculate the amount due after 10 years if Elizabeth borrowed a sum of $5450 at a rate of 6% simple interest.
(9) Richard took a loan of $5200 at the rate of 6% simple interest per annum. If he paid an amount of $7072 to clear the loan, then find the time period of the loan.
(10) Find the amount to be paid if Charles borrowed a sum of $5900 at 3% simple interest for 8 years.