Question

A person invests 5000 at a simple interest rate of 8% per annum for 3 years. What is the total interest earned by the person at the end of the period?

Hint:

Remember: For simple interest, use the formula \( \text{SI} = \frac{\text{P} \times \text{R} \times \text{T}}{100} \). Ensure the rate is in percentage and time is in years.

Answer 1

To determine the solution, we must compute the total simple interest acquired over 3 years.

1. Understanding Simple Interest: Simple interest is the profit generated or cost incurred for the utilization of funds over a specified duration. It is calculated exclusively on the initial principal amount throughout the entire investment period.

Formula:

Simple Interest (SI) = (Principal × Rate × Time) / 100

Where: - Principal = ₹5000 - Rate = 8% per annum - Time = 3 years

2. Value Substitution: The provided values are inserted into the formula: $ \text{SI} = \frac{5000 \times 8 \times 3}{100} $

3. Calculation Steps: Multiply the numerator values: $ 5000 \times 8 = 40000 $ $ 40000 \times 3 = 120000 $ Divide by 100: $ \frac{120000}{100} = ₹1200 $

4. Result Interpretation: This indicates an interest earning of ₹1200 for an investment of ₹5000 at an 8% annual rate over 3 years.

Final Answer: The total interest earned is ₹1200.