Question:
How much loan did Margaret borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $7620 to clear it?
Correct Answer
$6350
Solution And Explanation
Solution
Given,
Amount (A) = $7620
Rate of Simple Interest (R) = 4%
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
$7620 = P (1 + 4% × 5)
⇒ $7620 = P (1 + 4/100 × 5)
⇒ $7620 = P (1 + 4 × 5/100)
⇒ $7620 = P (1 + 20/100)
⇒ $7620 = P (100 + 20/100)
⇒ $7620 = P × 120/100
⇒ P × 120/100 = $7620
⇒ P = 7620/120/100
⇒ P = 7620 × 100/120
⇒ P = 7620 × 100/120
⇒ P = 762000/120
⇒ P = $6350
Thus, the sum borrowed (P) = $6350 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 = 4% per annum
Thus, Interest = 4% of principal
⇒ Interest = 4% of 100 = 4
Thus, Simple Interest for 1 year = 4
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 × 4 = 20
Thus, simple interest for 5 years = 20
Thus, Amount (A) = Principal + Interest
⇒ Amount = 100 + 20 = 120
Calculation of the Principal
Now,
∵ If the Amount is 120, then the Principal = 100
∴ If the Amount is 1, then the Principal = 100/120
∴ If the Amount is 7620, then the Principal = 100/120 × 7620
= 100 × 7620/120
= 762000/120
= 6350
Thus, Principal = $6350
Thus, the sum borrowed = $6350 Answer
Similar Questions
(1) What amount does Karen have to pay after 5 years if he takes a loan of $3950 at 8% simple interest?
(2) What amount does William have to pay after 6 years if he takes a loan of $3500 at 7% simple interest?
(3) What amount does Christopher have to pay after 6 years if he takes a loan of $4000 at 3% simple interest?
(4) If Ashley paid $5460 to settle his loan which he had taken 4 years before at a simple interest of 5%, then find the loan taken.
(5) What amount does Thomas have to pay after 5 years if he takes a loan of $3800 at 9% simple interest?
(6) Calculate the amount due if Patricia borrowed a sum of $3150 at 6% simple interest for 4 years.
(7) John took a loan of $4400 at the rate of 7% simple interest per annum. If he paid an amount of $7480 to clear the loan, then find the time period of the loan.
(8) What amount does Joseph have to pay after 6 years if he takes a loan of $3700 at 2% simple interest?
(9) Susan took a loan of $5300 at the rate of 9% simple interest per annum. If he paid an amount of $9593 to clear the loan, then find the time period of the loan.
(10) What amount does Jennifer have to pay after 6 years if he takes a loan of $3250 at 3% simple interest?