Question:
How much loan did Sarah borrow 5 years ago at a rate of simple interest 5% per annum, if he paid $7312.5 to clear it?
Correct Answer
$5850
Solution And Explanation
Solution
Given,
Amount (A) = $7312.5
Rate of Simple Interest (R) = 5%
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
$7312.5 = P (1 + 5% × 5)
⇒ $7312.5 = P (1 + 5/100 × 5)
⇒ $7312.5 = P (1 + 5 × 5/100)
⇒ $7312.5 = P (1 + 25/100)
⇒ $7312.5 = P (100 + 25/100)
⇒ $7312.5 = P × 125/100
⇒ P × 125/100 = $7312.5
⇒ P = 7312.5/125/100
⇒ P = 7312.5 × 100/125
⇒ P = 7312.5 × 100/125
⇒ P = 731250/125
⇒ P = $5850
Thus, the sum borrowed (P) = $5850 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 = 5% per annum
Thus, Interest = 5% of principal
⇒ Interest = 5% of 100 = 5
Thus, Simple Interest for 1 year = 5
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 × 5 = 25
Thus, simple interest for 5 years = 25
Thus, Amount (A) = Principal + Interest
⇒ Amount = 100 + 25 = 125
Calculation of the Principal
Now,
∵ If the Amount is 125, then the Principal = 100
∴ If the Amount is 1, then the Principal = 100/125
∴ If the Amount is 7312.5, then the Principal = 100/125 × 7312.5
= 100 × 7312.5/125
= 731250/125
= 5850
Thus, Principal = $5850
Thus, the sum borrowed = $5850 Answer
Similar Questions
(1) Calculate the amount due after 9 years if Robert borrowed a sum of $5100 at a rate of 6% simple interest.
(2) What amount does Mary have to pay after 5 years if he takes a loan of $3050 at 3% simple interest?
(3) Calculate the amount due after 10 years if William borrowed a sum of $5500 at a rate of 8% simple interest.
(4) Find the amount to be paid if Michael borrowed a sum of $5300 at 8% simple interest for 7 years.
(5) Find the amount to be paid if Christopher borrowed a sum of $6000 at 3% simple interest for 7 years.
(6) Karen took a loan of $5900 at the rate of 7% simple interest per annum. If he paid an amount of $8791 to clear the loan, then find the time period of the loan.
(7) Mary took a loan of $4100 at the rate of 7% simple interest per annum. If he paid an amount of $6970 to clear the loan, then find the time period of the loan.
(8) Andrew had to pay $5376 in order to furnish the loan taken 3 years before. If the rate of simple interest was 4% then find the sum borrowed.
(9) Charles took a loan of $5800 at the rate of 10% simple interest per annum. If he paid an amount of $11600 to clear the loan, then find the time period of the loan.
(10) Find the amount to be paid if Linda borrowed a sum of $5350 at 8% simple interest for 8 years.