Interest Rate Equation - Online Tutoring - Maths Online Tutors

Interest Rate Equation - Online Tutoring - Maths Online Tutors The rate of simple interest on an amount is calculated using the following interest rate equation, I = (P * R * T ) / 100Where R is the rate of interest, P is the principal amount, T is the time period of interest in years and I is the interest. Example 1: Find the rate of simple interest for the principal amount of $ 500, time period of 1 year, interest of $ 50. Solution: Here we are given, Principal amount ( P ) = $ 500 Time period (T) = 1 year Interest ( I ) = $ 50 For finding the rate of simple interest we use the interest rate equation, I = (P * R * T ) / 100 Now put the values in the equation, 50 = (500 * R * 1) / 100 50 = 500R/ 100 50 * 100 = (500R / 100) * 100 5000 = 500R 5000/500 = 500R / 500 R = 10 Thus the rate of interest is 10 %. Example 2: John earned $ 20 as interest on $ 200 for 2 years. Find the annual rate of simple interest. Solution: For finding the rate of simple interest we use the interest rate equation. I = (P * R * T ) / 100 We are given I = $ 20, P = $ 200, T = 2 years. 20 = ( 200 * R * 2 ) / 100 20 = 400 R / 100 20 = 4R 20 /4 = 4R/R R = 5 Thus the annual rate of interest is 5%.