Question:
How much loan did Dorothy borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $8700 to clear it?
Correct Answer
$7250
Solution And Explanation
Solution
Given,
Amount (A) = $8700
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
$8700 = P (1 + 4% × 5)
⇒ $8700 = P (1 + 4/100 × 5)
⇒ $8700 = P (1 + 4 × 5/100)
⇒ $8700 = P (1 + 20/100)
⇒ $8700 = P (100 + 20/100)
⇒ $8700 = P × 120/100
⇒ P × 120/100 = $8700
⇒ P = 8700/120/100
⇒ P = 8700 × 100/120
⇒ P = 8700 × 100/120
⇒ P = 870000/120
⇒ P = $7250
Thus, the sum borrowed (P) = $7250 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 8700, then the Principal = 100/120 × 8700
= 100 × 8700/120
= 870000/120
= 7250
Thus, Principal = $7250
Thus, the sum borrowed = $7250 Answer
Similar Questions
(1) Calculate the amount due after 10 years if John borrowed a sum of $5200 at a rate of 4% simple interest.
(2) Find the amount to be paid if Joseph borrowed a sum of $5700 at 6% simple interest for 7 years.
(3) If Anthony paid $4988 to settle his loan which he had taken 4 years before at a simple interest of 4%, then find the loan taken.
(4) Mary had to pay $3324.5 in order to furnish the loan taken 3 years before. If the rate of simple interest was 3% then find the sum borrowed.
(5) Margaret took a loan of $6700 at the rate of 8% simple interest per annum. If he paid an amount of $11524 to clear the loan, then find the time period of the loan.
(6) What amount does Mary have to pay after 6 years if he takes a loan of $3050 at 2% simple interest?
(7) Calculate the amount due after 9 years if Christopher borrowed a sum of $6000 at a rate of 9% simple interest.
(8) Find the amount to be paid if Karen borrowed a sum of $5950 at 3% simple interest for 8 years.
(9) If Andrew paid $5376 to settle his loan which he had taken 4 years before at a simple interest of 3%, then find the loan taken.
(10) Find the amount to be paid if Thomas borrowed a sum of $5800 at 5% simple interest for 7 years.