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What sum (in тВ╣) will earn an interest of тВ╣900 in 3 years at 6% simple interest per year?
4500
5000
5500
6000
5000
Think of the total percentage earned over the period: R├ЧT=6%├Ч3=18%. Simply find 18% of the principal which must equal 900; since 18├Ч5=90, it follows that 18%├Ч5000=900.
Simple Interest (SI) = тВ╣900, Time (T) = 3 years, Rate of Interest (R) = 6% per annum.
P=R├ЧTSI├Ч100тАЛ
Think of the total percentage earned over the period: R├ЧT=6%├Ч3=18%. Simply find 18% of the principal which must equal 900; since 18├Ч5=90, it follows that 18%├Ч5000=900.
Students often mistake simple interest for compound interest, or confuse the multiplication of Rate and Time with the actual Principal value.
Identify given values
Identify the known parameters: Interest (SI=900), Time (T=3), and Rate (R=6).
SI=900,R=6%,T=3
Set up the formula
Use the standard Simple Interest formula, SI=100P├ЧR├ЧTтАЛ, rearranged to solve for the Principal P.
P=6├Ч3900├Ч100тАЛ
Calculate the result
Divide 900 by the product of 6 and 3, which is 18. Then multiply by 100 to get the principal.
P=1890000тАЛ=5000
B is correct because the principal amount calculates to тВ╣5000 when applying the formula for Simple Interest.
This concept is foundational for Profit and Loss questions, where the principal is analogous to the Cost Price and the interest behaves similarly to a markup or discount calculation.
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