Question

How to Find the principal, rate, or time using the simple interest formula? example.

Answer 1

Solution:-

We now that the simple interest formula is

A = P(1 + rt)

Where

A = Total Amount (principal + interest)

P = Principal Amount

I = Interest Amount

r = Rate of Interest per year in decimal

t = Time Period involved.

By manipulating the above formula we can find each components.

a) How to find principal

From the above formula Principal amount,

P = A /(1 + rt)

Let assume A= $2500 , r= 10% per annum , t= 15 years.

Now Principal (P)= $2500/(1+0.10*15) = $2500/2.5 = $1000.

b) How to find rate

From the above formula interest rate in decimal

r = (1/t)(A/P - 1)

Let us assume A= $2500 , P= $1000 and t= 15 years

Now,

r= (1/15)(2500/1000-1) =(1/15)(2.5-1)=0.10

The r in percentage = 10%

C) How to time

From the above formula time can be calculated as

t = (1/r)(A/P - 1)

Let us assume r= 10% , A=$2500 , P= $1000

Now time can be calculated as follows:-

t= (1/0.10)*(2500/1000-1)

t= 10*(2.5-1)= 10*1.5= 15 years.

Please feel free to ask if you have any query in the comment section.