BECE Last Hour Diet: Simple Interest Made Simpler
This piece of write up seeks to demystify the terror students have in dealing with simple interest questions in mathematics.
Simple interest is one of those business mathematics topics in mathematics at the junior high level. All the tricks to knowing the ins and outs of the topic are going to be made simpler.
Keep enjoy reading this piece and trust me by the end of it all you would love working with all kinds of simple interest questions.
Fasten your seatbelt as we run ourselves through.
Let’s first get to know what the simple interest
What a Simple Interest is
Simple interest is an amount charge on loan taken or deposit made with a non – financial and financial institution or any other forms of transactions which requires the payment of interest on a given sum of money. These are usually calculated on yearly basis (annually or per annum)
To determine s!mple interest you need to know
- The amount at stake (be it loan taken or amount given or deposit at bank), this is what is often refer to as the PRINCIPAL.
- You also need to know the rate that is charged against the principal. This is most presented in percentage form (1%, 1.5% , etc.)
- And last you require duration for which the loan amount, amount taken or deposit for which the interest rate is calculated on. For example, the period can be 2 years, 1 year and beyond.
Simple Interest Workings
Now let’s move on to see how the real working is done.
Simple interest: you multiply the principal by rate and the time
Mathematically expressed as
Simple Interest (I)= Principal (P) X Rate (R) X Time (T)
I = P X R X T
Alternatively, you can also multiply the rate by the principal and the answer you get; you multiply that by the number of years (time). Because the rates are given in percentages, it will be the rate divided by 100 times the principal.
I = R/100 X P
The answer from this is multiplied by the time (if it is two years, you multiply the answer by two years).
Finding the Rate and Time
You can as well calculate the percentage rate on the principal year by year and then all the interest for the periods are put together
Like, interest for first year; P x R
Interest for second year; P x R
For instance if the number of years is 2, you will do this two times and if it is three, do it three times and the answers for each of the years are added up.
Also supposing you are given, simple interest, principal and you are asked to find the interest rate or the rate. Just make the Rate (R) the subject of the equation. See below
Formula; I = PRT
So making R the subject of the equation will be to divide both sides of the equation by the co-efficient of R (I meant the values attached to R). These values are P and T. SEE BELOW
I/PT = PRT/PT
The PT and the side you have the co-efficient will cancel themselves leaving R standing alone. See below
I/PT = R
Therefore Rate (R) will be Interest divided by the products of Principal (P) and Time (T)
To find time, also make the (T) subject of the equation like I have done to the Rate (R) in the scenario above.
Trial Question
Now try your hands on the questions that follow
- Kofi deposited an amount of 50,000.00 cedis at Consolidated Bank Ghana at rate of 1% per annum for the period of 3 years. Calculate the interest that will be accrued by the end of the third year.
- Mina is confused as to what rate would have been applied to her money deposited after her bank told her they’ll give her 250 interest every year. The amount of money she put at the bank is 15,000.00 cedis. Help her to know the rate applicable to her principal.
Few tips;
Amount deposited or taken is the same as the Principal
Period is the same as time and years
Simple interest is the same as interest
And interest rate is the same as rate as it is often the percentage figure you find in the question except in few cases where they are put in decimals.
The decimals don’t change anything; go ahead apply the same thing learned above.
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