Simple Interest Questions and Answers


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Simple interest is normally expressed as a percentage and is normally used to show what either has to be paid to borrow money or lend money. By borrowing / lending the principal amount (the loan amount) you would normally expect to receive something in return or pay something because of this loan. This is normally expressed as a percentage and is called the simple interest rate. There is also something called the Compound Interest Rate Formula but that you can read more about in the link just provided.

The formula for simple interest is the following: Simple Interest = Principal*Interest Rate*Time

This means that to calculate the simple interest amount you just need to know the interest rate and the time scale and the principal amount. Let's look at an example:

Principal: 100 Simple Interest: 5% (will be expressed as 0.05 in calculations) Time: 1 Year Simple Interest Amount: 100*0.05*1 = 5

If the Time period was 2 Years then it would just be 100*0.05*2=10

Now let's look at some questions using this newly learnt simple interest formula.

A sum of 12,500 amounts to 15,500 in 4 years at the rate of simple interest. What is the rate of interest?


A. 3%
B. 4%
C. 6%
D. None of these

Answer & Explanation:

Answer: Option C

Explanation: S.I. = (15500 - 12500) = 3000.

Rate = (100 x 3000)/(12500x4)% = 6%



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A person takes a loan of 200 at 5% simple interest. He returns 100 at the end of 1 year. In order to clear his dues at the end of 2 years, he would pay:


A. 105
B. 110
C. 115
D. 115.50

Answer & Explanation:

Answer: Option C

Explanation:

Amount to be paid =

Simple Interest Questions and Answers

 

= 115



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An automobile financier claims to be lending money at simple interest, but he includes the interest every six months for calculating the principal. If he is charging an interest of 10%, the effective rate of interest becomes:


A. 10%
B. 10.25%
C. 10.5%
D. None of these

Answer & Explanation:

Answer: Option B

Explanation:

Simple Interest Questions and Answers


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A sum of 725 is lent in the beginning of a year at a certain rate of interest. After 8 months, a sum of 362.50 more is lent but at the rate twice the former. At the end of the year, 33.50 is earned as interest from both the loans. What was the original rate of interest?


A. 3.6%
B. 4.5%
C. 5%
D. None of these

Answer & Explanation:

Answer: Option D

Explanation:

Simple Interest Questions and Answers



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A man took loan from a bank at the rate of 12% p.a. simple interest. After 3 years he had to pay Dollar 5400 interest only for the period. The principal amount borrowed by him was:


A. Dollar 2000
B. Dollar 10,000
C. Dollar 15,000
D. Dollar 20,000

Answer & Explanation:

Answer: Option C

Explanation: Principal = Dollar (100 x 5400)/(12x3) = Dollar 15000.



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