Question:
How much loan did Timothy borrow 5 years ago at a rate of simple interest 4% per annum, if he paid $8880 to clear it?
Correct Answer
$7400
Solution And Explanation
Solution
Given,
Amount (A) = $8880
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
$8880 = P (1 + 4% × 5)
⇒ $8880 = P (1 + 4/100 × 5)
⇒ $8880 = P (1 + 4 × 5/100)
⇒ $8880 = P (1 + 20/100)
⇒ $8880 = P (100 + 20/100)
⇒ $8880 = P × 120/100
⇒ P × 120/100 = $8880
⇒ P = 8880/120/100
⇒ P = 8880 × 100/120
⇒ P = 8880 × 100/120
⇒ P = 888000/120
⇒ P = $7400
Thus, the sum borrowed (P) = $7400 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 8880, then the Principal = 100/120 × 8880
= 100 × 8880/120
= 888000/120
= 7400
Thus, Principal = $7400
Thus, the sum borrowed = $7400 Answer
Similar Questions
(1) What amount does Charles have to pay after 6 years if he takes a loan of $3900 at 5% simple interest?
(2) Karen took a loan of $5900 at the rate of 8% simple interest per annum. If he paid an amount of $8732 to clear the loan, then find the time period of the loan.
(3) Calculate the amount due if Jessica borrowed a sum of $3750 at 4% simple interest for 4 years.
(4) Daniel took a loan of $6200 at the rate of 8% simple interest per annum. If he paid an amount of $9672 to clear the loan, then find the time period of the loan.
(5) David had to pay $3910 in order to furnish the loan taken 3 years before. If the rate of simple interest was 5% then find the sum borrowed.
(6) Christopher took a loan of $6000 at the rate of 7% simple interest per annum. If he paid an amount of $9360 to clear the loan, then find the time period of the loan.
(7) What amount does Mary have to pay after 6 years if he takes a loan of $3050 at 4% simple interest?
(8) What amount does Linda have to pay after 6 years if he takes a loan of $3350 at 9% simple interest?
(9) Matthew took a loan of $6400 at the rate of 7% simple interest per annum. If he paid an amount of $9984 to clear the loan, then find the time period of the loan.
(10) Patricia had to pay $3339 in order to furnish the loan taken 3 years before. If the rate of simple interest was 2% then find the sum borrowed.