Simple Interest (\(I\)):
- Simple interest is a quick and easy method of calculating the interest charge on loan.
- Simple interest is determined by multiplying the interest rate by the principal by the number of days that elapse between payments.
- This type of interest usually applies to automobile loans or short-term loans,
Derivation of the formula to calculate the Simple interest (\(I\)):
First, take \(P\) as the principal or sum and \(r\%\) as a rate percent per annum. On every \(₹100\) borrowed the interest paid is \(₹r\).
Therefore, on \(₹P\) borrowed the interest paid for one year would be .
Then the interest period for two years .
Then the interest period for three years and so on.
If the time period is '\(n\) ' number of years, the formula will be .
Amount (\(A\)) :
If the principal amount (P) and simple interest (I) is given, then we can find out the amount by adding the principle and simple interest.
Simply rearranging both the formula as per requirement we can find all the variants in the formula.
Another formula can be derived based on .