Simple Interest
Interest earned on a principal at a flat annual rate.
SI = \dfrac{P \times R \times T}{100}
1What it means
Simple interest is calculated only on the original principal, not on previously earned interest. The total amount is A = P + SI.
2Variables
| Symbol | Meaning |
|---|---|
| SI | Simple interest |
| P | Principal (amount invested/borrowed) |
| R | Rate of interest per annum (%) |
| T | Time in years |
3Worked examples
Example 1 Worked solution
Q. Find the simple interest on ₹1,000 at 5% per annum for 2 years.
- SI = (P × R × T) / 100.
- = (1000 × 5 × 2) / 100.
- = 10000 / 100.
✓ SI = ₹100
4Where it's used
- ✦Short-term loans and fixed deposits quoted at simple interest.
- ✦Quick mental estimates of interest.
5Tips & common mistakes
- !Time must be in years — convert months by dividing by 12.
- !The question often asks for the total amount A = P + SI, not just SI.