Jawahar Navodaya Vidyalaya Selection Test (JNVST)
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Simple Interest: Understanding and calculating interest on principal amounts
🚀 Simple Interest is a way to calculate the extra money you earn or pay when you lend or borrow money. It's based on the original amount of money, called the principal, the rate of interest, and the time period for which the money is lent or borrowed. In India, this concept is often used in banks, savings accounts, and loans.
Examples💡
Example 1: Riya deposits ₹1,000 in a bank at an interest rate of 5% per annum for 2 years. The interest she earns is calculated as follows: Simple Interest = (Principal × Rate × Time) / 100 = (1000 × 5 × 2) / 100 = ₹100.
Example 2: Aman borrows ₹2,000 from his friend at an interest rate of 3% per annum for 3 years. The interest he needs to pay is: Simple Interest = (Principal × Rate × Time) / 100 = (2000 × 3 × 3) / 100 = ₹180.
Example 3: A farmer takes a loan of ₹5,000 at an interest rate of 4% per annum for 1 year to buy seeds. The interest he pays is: Simple Interest = (Principal × Rate × Time) / 100 = (5000 × 4 × 1) / 100 = ₹200.
Common Mistakes to Avoid⚠️
- Mistake: Forgetting to divide by 100 in the formula. Correction: Always remember to divide the product of Principal, Rate, and Time by 100.
- Mistake: Mixing up the rate of interest with the time period. Correction: Ensure that the rate is per annum and the time is in years.
- Mistake: Using the wrong units for principal or interest rate. Correction: Always use the same units, typically rupees for principal and percentage for rate.