Question:
How much loan did Kevin borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $8520 to clear it?
Correct Answer
$7100
Solution And Explanation
Solution
Given,
Amount (A) = $8520
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
$8520 = P (1 + 4% × 5)
⇒ $8520 = P (1 + 4/100 × 5)
⇒ $8520 = P (1 + 4 × 5/100)
⇒ $8520 = P (1 + 20/100)
⇒ $8520 = P (100 + 20/100)
⇒ $8520 = P × 120/100
⇒ P × 120/100 = $8520
⇒ P = 8520/120/100
⇒ P = 8520 × 100/120
⇒ P = 8520 × 100/120
⇒ P = 852000/120
⇒ P = $7100
Thus, the sum borrowed (P) = $7100 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 8520, then the Principal = 100/120 × 8520
= 100 × 8520/120
= 852000/120
= 7100
Thus, Principal = $7100
Thus, the sum borrowed = $7100 Answer
Similar Questions
(1) What amount does Charles have to pay after 5 years if he takes a loan of $3900 at 7% simple interest?
(2) Calculate the amount due if Richard borrowed a sum of $3600 at 7% simple interest for 3 years.
(3) What amount will be due after 2 years if John borrowed a sum of $3100 at a 4% simple interest?
(4) In how much time a principal of $3200 will amount to $3840 at a simple interest of 5% per annum?
(5) Betty took a loan of $6500 at the rate of 8% simple interest per annum. If he paid an amount of $11700 to clear the loan, then find the time period of the loan.
(6) What amount does Jessica have to pay after 6 years if he takes a loan of $3750 at 9% simple interest?
(7) Calculate the amount due after 9 years if Robert borrowed a sum of $5100 at a rate of 5% simple interest.
(8) If Jennifer paid $3640 to settle his loan which he had taken 4 years before at a simple interest of 3%, then find the loan taken.
(9) Calculate the amount due if James borrowed a sum of $3000 at 6% simple interest for 4 years.
(10) What amount does Barbara have to pay after 6 years if he takes a loan of $3550 at 4% simple interest?