Question:
How much loan did Kenneth borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $8400 to clear it?
Correct Answer
$7000
Solution And Explanation
Solution
Given,
Amount (A) = $8400
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
$8400 = P (1 + 4% × 5)
⇒ $8400 = P (1 + 4/100 × 5)
⇒ $8400 = P (1 + 4 × 5/100)
⇒ $8400 = P (1 + 20/100)
⇒ $8400 = P (100 + 20/100)
⇒ $8400 = P × 120/100
⇒ P × 120/100 = $8400
⇒ P = 8400/120/100
⇒ P = 8400 × 100/120
⇒ P = 8400 × 100/120
⇒ P = 840000/120
⇒ 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 = 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 8400, then the Principal = 100/120 × 8400
= 100 × 8400/120
= 840000/120
= 7000
Thus, Principal = $7000
Thus, the sum borrowed = $7000 Answer
Similar Questions
(1) James took a loan of $4000 at the rate of 7% simple interest per annum. If he paid an amount of $5680 to clear the loan, then find the time period of the loan.
(2) Christopher took a loan of $6000 at the rate of 10% simple interest per annum. If he paid an amount of $10200 to clear the loan, then find the time period of the loan.
(3) What amount does Barbara have to pay after 5 years if he takes a loan of $3550 at 6% simple interest?
(4) William took a loan of $5000 at the rate of 9% simple interest per annum. If he paid an amount of $8150 to clear the loan, then find the time period of the loan.
(5) Jennifer took a loan of $4500 at the rate of 7% simple interest per annum. If he paid an amount of $7650 to clear the loan, then find the time period of the loan.
(6) What amount does Elizabeth have to pay after 5 years if he takes a loan of $3450 at 2% simple interest?
(7) Jennifer took a loan of $4500 at the rate of 7% simple interest per annum. If he paid an amount of $6705 to clear the loan, then find the time period of the loan.
(8) Find the amount to be paid if Robert borrowed a sum of $5100 at 10% simple interest for 8 years.
(9) What amount does Barbara have to pay after 5 years if he takes a loan of $3550 at 2% simple interest?
(10) Daniel had to pay $4715 in order to furnish the loan taken 3 years before. If the rate of simple interest was 5% then find the sum borrowed.