Question:
How much loan did Donna borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $8220 to clear it?
Correct Answer
$6850
Solution And Explanation
Solution
Given,
Amount (A) = $8220
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
$8220 = P (1 + 4% × 5)
⇒ $8220 = P (1 + 4/100 × 5)
⇒ $8220 = P (1 + 4 × 5/100)
⇒ $8220 = P (1 + 20/100)
⇒ $8220 = P (100 + 20/100)
⇒ $8220 = P × 120/100
⇒ P × 120/100 = $8220
⇒ P = 8220/120/100
⇒ P = 8220 × 100/120
⇒ P = 8220 × 100/120
⇒ P = 822000/120
⇒ P = $6850
Thus, the sum borrowed (P) = $6850 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 8220, then the Principal = 100/120 × 8220
= 100 × 8220/120
= 822000/120
= 6850
Thus, Principal = $6850
Thus, the sum borrowed = $6850 Answer
Similar Questions
(1) Jessica took a loan of $5500 at the rate of 8% simple interest per annum. If he paid an amount of $9900 to clear the loan, then find the time period of the loan.
(2) If Christopher paid $4480 to settle his loan which he had taken 4 years before at a simple interest of 3%, then find the loan taken.
(3) What amount does Richard have to pay after 5 years if he takes a loan of $3600 at 7% simple interest?
(4) If Joshua paid $5880 to settle his loan which he had taken 4 years before at a simple interest of 5%, then find the loan taken.
(5) Sarah had to pay $4312 in order to furnish the loan taken 3 years before. If the rate of simple interest was 4% then find the sum borrowed.
(6) Calculate the amount due if Jennifer borrowed a sum of $3250 at 4% simple interest for 4 years.
(7) What amount does Robert have to pay after 5 years if he takes a loan of $3100 at 7% simple interest?
(8) Lisa took a loan of $6100 at the rate of 6% simple interest per annum. If he paid an amount of $9028 to clear the loan, then find the time period of the loan.
(9) What amount does James have to pay after 6 years if he takes a loan of $3000 at 5% simple interest?
(10) If James paid $3600 to settle his loan which he had taken 4 years before at a simple interest of 5%, then find the loan taken.