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) If Karen borrowed $3950 from a bank at a rate of 3% simple interest per annum then find the amount to be paid after 2 years.
(2) What amount will be due after 2 years if David borrowed a sum of $3200 at a 10% simple interest?
(3) Find the amount to be paid if Mary borrowed a sum of $5050 at 7% simple interest for 8 years.
(4) What amount will be due after 2 years if Mark borrowed a sum of $3700 at a 6% simple interest?
(5) What amount will be due after 2 years if Anthony borrowed a sum of $3650 at a 7% simple interest?
(6) In how much time a principal of $3000 will amount to $3600 at a simple interest of 4% per annum?
(7) Calculate the amount due if Susan borrowed a sum of $3650 at 4% simple interest for 3 years.
(8) Karen took a loan of $5900 at the rate of 10% simple interest per annum. If he paid an amount of $11210 to clear the loan, then find the time period of the loan.
(9) What amount does William have to pay after 6 years if he takes a loan of $3500 at 10% simple interest?
(10) What amount does Richard have to pay after 6 years if he takes a loan of $3600 at 4% simple interest?