Shortcuts and Tricks for Simple Interest

Simple interest is a straightforward method of calculating the interest charged on a loan or paid on an investment, based on the principal amount, interest rate, and time period. This article will share quick and easy tricks to make calculating simple interest even faster. By learning these shortcuts, you can save time and make smarter financial decisions.

Simple interest is a method for calculating the interest charged on a loan or earned on an investment based on the original principal amount, the interest rate, and the time period over which the interest is calculated.

It is called "simple" because it does not consider the effect of compounding, where interest is earned on previously accumulated interest.

Formula for Simple Interest

The formula for simple interest is given by:

SI = (P × R × T)/100

Where,

• P is the Principal Amount,
• R is the Rate of Interest, and
• T is the duration for which money is invested or borrowed.

Note: If the rate is given in decimal representation, then SI = PRT.

Basic Concepts of Simple Interest

Some concepts that help us understand simple interests are:

• Principal Amount: The initial amount of money invested or borrowed.
• Rate of Interest: The percentage of the principal charged as interest per period (usually per year).
• Time Period: The duration for which the money is invested or borrowed, typically measured in years.

Tricks Related - Simple Interest

Some tricks related to simple interest include:

• Quick Percentage Calculations
• Daily Interest Calculation
• Monthly Interest Calculation
• Interest for Multiple Years

Quick Percentage Calculations

When dealing with simple interest, quickly calculating percentages is essential. Here are some shortcuts:

Using these shortcuts, you can quickly determine interest rates for various principal amounts without the need for complex calculations.

Daily Interest Calculation

Daily interest calculation is helpful for short-term loans or investments. Here's a simple trick to calculate it:

Convert Annual Rate to Daily Rate using following relation:

Daily Rate = Annual Rate/365

For example, if the annual rate is 5%, the daily rate is 5/365 ≈ 0.0137 %.

Daily Interest = (P × R × T)/(365 × 100)

Where P is the principal and R is the annual interest rate.

Monthly Interest Calculation

Monthly interest calculations are common for loans and investments with monthly compounding. Here's an efficient way to do it:

Convert Annual Rate to Monthly Rate:

Monthly Rate = Annual Rate/12

For example, if the annual rate is 5%, the monthly rate is 5/12 ≈ 0.4167 %.

Monthly Interest = (P × R × T)/(12 × 100)

Misc Tricks on Simple Interest

Some other miscellaneous tricks related to simple interest are given below:

• If the interest on a sum of money is 1/x of the principal, and the number of years equals the rate of interest, then the rate can be calculated using the formula: r = √(100/x).

• If a sum of money becomes x times its original amount in t years at simple interest, then the rate is calculated as [100(x - 1)]/t %.

• If a sum of money becomes x times its original amount in t years at a simple rate of interest, then the time is calculated as [100(x - 1)]/R.

• If an amount P₁ is lent out at a simple interest of R₁% per annum and another amount P₂ at a simple interest rate of R₂% per annum, then the rate of interest for the whole sum can be given by:

R = (P₁R₁ + P₂R₂​)/(P₁ + P₂)

Simple Interest : Questions and Answers

Question 1 : What would be the annual interest accrued on a deposit of Rs. 10,000 in a bank that pays 4 % per annum rate of simple interest ?

Solution :

Here, P = 10000, R = 4, T = 1

=> SI = P x R x T / 100

=> SI = 10000 x 4 x 1 / 100

=> SI = 400

Thus, the annual interest would be Rs. 400

Question 2 : A sum of money amounts to Rs. 28,000 in 2 years at 20 % simple interest per annum. Find the sum.

Solution :

Here, A = 18000, T = 2, R = 20

=> A = P + SI

=> A = P + (P x R x T / 100)

=> A = P [1 + (R x T / 100)]

=> 28000 = P [1 + 0.4]

=> P = 28000 / 1.4

=> P = 20000

Thus, the required sum is Rs. 20,000

Question 3 : A man borrowed a certain sum of money at the rate of 6 % per annum for the first two years , 9% per annum for the next three years, and 14% per annum for the period beyond 5 years. If he pays a total interest of Rs. 22,800 at the end of 9 years, find the amount he borrowed.

Solution :

Let the borrowed sum be P.

=> SI for first 2 years + SI for next 3 years + SI for next 4 years = 22800

=> (P x 6 x 2 / 100) + (P x 9 x 3 / 100) + (P x 14 x 4 / 100) = 22800

=> 95 P / 100 = 22800

=> P = 24000

Therefore, Borrowed sum = Rs. 24,000

Question 4 : At what annual rate of interest will a sum of money be thrice in 10 years?

Solution :

Amount = Principal + SI

If the sum of money would be thrice the principal after 10 years, the SI would be twice the principal.

=> SI = 2 x P

=> (P x R x T / 100) = 2 X P

=> R x T / 100 = 2

=> R x T = 200

=> R x 10 = 200

=> R = 20 %

Thus, the required rate of interest is 20 %

Question 5 : The simple interest on a sum of money in 5 years at 12 % per annum is Rs. 400 less than the simple interest accrued on the same sum in 7 years at 10 % per annum. Find the sum.

Solution :

Let the sum be P.

=> SI in 5 years at 12 % per annum = P x 12 x 5 / 100 = 0.6 P

=> SI in 7 years at 10 % per annum = P x 10 x 7 / 100 = 0.7 P

Now, according to the question,

0.7 P - 0.6 P = 400

=> 0.1 P = 400

=> P = 4000

Thus, the required sum is Rs. 4000

Related Articles:

• Simple Interest Calculator
• Simple Interest Quizz
• Interest Rate Formula
• Compound Interest Formula