Simple interest and Compound Interest are from the commercial section of the quantitative aptitude paper. In this section we will be talking about simple interest and in the next section we will deal with compound interest. There are 4 important terms related to a simple interest problem. Let’s explore.

It is the money that is invested on something or the money that we give to someone as a loan or the money that we borrow from a bank or a moneylender.

It is the extra money that a borrower has to pay back to the moneylender.

It is the total money that is paid by the borrower to the moneylender or bank.

**Amount = Principal + Interest**

It is the interest that the borrower has to pay on Rs. 100 for a given period of time.

For instance, if a bank gives a loan to a person at a rate of 4% per annum (also written as 4% p.a.) for a year, then interest paid by that person on Rs. 100 for 1 year will be Rs. 4

Similarly, if the rate is 1% per month then interest paid on Rs. 100 for 1 month will be Rs. 1

Note! If the time period of interest rate is not mentioned in the question then we generally consider the rate of interest as per annum.

It the time for which the money (Principal) is borrowed, lent or invested.

Note! Take the unit of time as per interest rate. If the interest rate is in year then time will be in year. If the interest rate is in month then time will be in month.

When time is given in days and we have to convert it into years then in that case always divide the given days by 365.

When counting number of days between any two given dates, always count the end date and leave the start date. Or, count the start date and leave the last date. But never count both the dates.

For example, find the number of days from 1^{st} January to 3^{rd} January?

The answer is 2 days.

Explanation: 1^{st} January to 2^{nd} January is 1 day. And 2^{nd} January to 3^{rd} January is 1 day. So, total number of days is equal to 2.

It is the interest calculated on the Principal P at a given rate R for a given time period T. And the formula for simple interest is

SI = (PxRxT)/100

**Some questions**

Q. Find the Simple Interest on Rs. 10000 at interest rate of 10% p.a. for 1 year?

Ans. Given, Principal = Rs. 10000, rate = 10% p.a. and Time = 1 year

So, SI = (PxRxT)/100 = (10000x10x1)/100 = Rs. 1000

Q. Find the amount paid for the previous question?

Ans. We know that amount is the sum of interest and principal. In the previous question the principal was Rs. 10000 and interest was Rs. 1000 so, amount will be Rs. (10000 + 1000) i.e., Rs. 11000

Q. Find the time if the amount paid by a borrower is Rs. 1010 at interest rate 1% p.a. on Rs. 1000?

Ans. From the given question, we get

Amount A = Rs. 1010

Principal P = Rs. 1000

Rate R = 1% p.a.

Therefore, Simple Interest SI = Amount – Principal = Rs. (1010 – 1000) = Rs. 10

So, Time T = (SI x 100) / (P x R) = (10 x 100) / (1000 x 1) = 1 year.

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