Learn about banks and how to calculate simple interest through these examples.
Example 1: Banks and Savings
Explain the role of banks and the concept of saving money.
Concept: Banks are financial institutions where people can deposit (save) money and withdraw money. They also provide loans.
Saving Money: Depositing money in a bank is a way to keep it safe and also earn some extra money called interest.
Types of Accounts: Common types of bank accounts include Savings Accounts (for saving money and earning interest) and Current Accounts (mostly for businesses, less focus on interest).
Example 2: What is Simple Interest?
Explain the terms related to simple interest: Principal, Rate, Time, and Interest.
Principal (P): The initial amount of money deposited or borrowed.
Example: If you deposit 1000 rupees, the Principal is 1000 rupees.
Rate of Interest (R): The percentage at which interest is calculated, usually per year (per annum, p.a.).
Example: If the rate is 5% p.a., it means 5 rupees interest is earned on every 100 rupees per year.
Time (T): The duration for which the money is deposited or borrowed, usually in years.
Example: If you deposit money for 2 years, the Time is 2 years.
Interest (I): The extra money earned on the principal amount (for deposits) or the extra money paid on the principal amount (for loans). Simple interest is calculated only on the original principal amount.
Amount (A): The total money at the end of the time period. Amount = Principal + Interest.
Formula: A = P + I
Example 3: Calculate Simple Interest
Calculate the simple interest on a principal of 5000 rupees at a rate of 10% per annum for 3 years.
Step 1: Identify the given values:
Principal (P) = 5000 rupees
Rate (R) = 10% per annum
Time (T) = 3 years
Step 2: Use the formula for Simple Interest:
Simple Interest (I) = (P * R * T) / 100
Step 3: Substitute the values into the formula:
I = (5000 * 10 * 3) / 100
Step 4: Calculate the interest.
I = (50000 * 3) / 100
I = 150000 / 100
I = 1500
Result: The simple interest is 1500 rupees.
Example 4: Calculate Amount
Find the total amount after 2 years if a principal of 8000 rupees is deposited at a simple interest rate of 8% per annum.
Step 1: Identify the given values:
Principal (P) = 8000 rupees
Rate (R) = 8% per annum
Time (T) = 2 years
Step 2: First, calculate the Simple Interest (I) using the formula:
I = (P * R * T) / 100
Step 3: Substitute the values and calculate I:
I = (8000 * 8 * 2) / 100
I = (64000 * 2) / 100
I = 128000 / 100
I = 1280
The simple interest is 1280 rupees.
Step 4: Calculate the total Amount (A) using the formula:
Amount (A) = Principal (P) + Interest (I)
Step 5: Substitute the values of P and I:
A = 8000 + 1280
A = 9280
Result: The total amount after 2 years is 9280 rupees.
Practice Mode
Enter a simple problem to calculate Simple Interest or Amount.
Note: Enter problems in a clear format, like "Calculate simple interest for P=5000, R=10, T=3" or "Find amount for P=8000, R=8, T=2". Specify P, R, and T values.
Related Concepts
Explore these related financial concepts to deepen your understanding of banks and simple interest.
Deposit
Putting money into a bank account.
Withdrawal
Taking money out of a bank account.
Loan
Money borrowed from a bank, usually with interest.