Question:
How much loan did Amanda borrow 5 years ago at a rate of simple interest 5% per annum, if he paid $8937.5 to clear it?
Correct Answer
$7150
Solution And Explanation
Solution
Given,
Amount (A) = $8937.5
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
$8937.5 = P (1 + 5% × 5)
⇒ $8937.5 = P (1 + 5/100 × 5)
⇒ $8937.5 = P (1 + 5 × 5/100)
⇒ $8937.5 = P (1 + 25/100)
⇒ $8937.5 = P (100 + 25/100)
⇒ $8937.5 = P × 125/100
⇒ P × 125/100 = $8937.5
⇒ P = 8937.5/125/100
⇒ P = 8937.5 × 100/125
⇒ P = 8937.5 × 100/125
⇒ P = 893750/125
⇒ P = $7150
Thus, the sum borrowed (P) = $7150 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 8937.5, then the Principal = 100/125 × 8937.5
= 100 × 8937.5/125
= 893750/125
= 7150
Thus, Principal = $7150
Thus, the sum borrowed = $7150 Answer
Similar Questions
(1) Calculate the amount due after 10 years if Elizabeth borrowed a sum of $5450 at a rate of 2% simple interest.
(2) What amount will be due after 2 years if Joseph borrowed a sum of $3350 at a 6% simple interest?
(3) Calculate the amount due after 10 years if David borrowed a sum of $5400 at a rate of 8% simple interest.
(4) What amount will be due after 2 years if Thomas borrowed a sum of $3400 at a 5% simple interest?
(5) Joseph took a loan of $5400 at the rate of 9% simple interest per annum. If he paid an amount of $10260 to clear the loan, then find the time period of the loan.
(6) If Kimberly paid $5022 to settle his loan which he had taken 4 years before at a simple interest of 2%, then find the loan taken.
(7) What amount does Jennifer have to pay after 6 years if he takes a loan of $3250 at 3% simple interest?
(8) If Michael paid $3696 to settle his loan which he had taken 4 years before at a simple interest of 3%, then find the loan taken.
(9) If Richard paid $4176 to settle his loan which he had taken 4 years before at a simple interest of 4%, then find the loan taken.
(10) What amount does Joseph have to pay after 5 years if he takes a loan of $3700 at 10% simple interest?