Lataben borrowed some money frome a bank at a rate of 10 p. c.p.a. interest for 2.5 years to start cottage industry. If she paid 10250 rupees as total interest, how much money had she borrowed ?
Answers
The compound interest accumulation formula is as follows :
Amount = P(1 + i) ^n
Where :
P = Principle amount
n = Period of investment
i = Rate of interest.
The formula for getting the interest is
P(1 + i)^n - P = interest
Doing the substitution we have :
P(1.10)^2.5 - P = 10250
1.2961P - P = 10250
0.2961P = 10250
P = 10250/0.2961 = 34616.68
Rupees 34616.68
The above question is based on Simple Interest where the Principal amount borrowed is Rs X which is unknown, For Number of years 2.5 years at rate of interest 10 % however the interest paid is 10,250/-
Therefore to calculate the Principal Amount we shall use the formula I = P* N* R or T / 100
i.e 10250 = P * 2.5 * 10/100
10250 = P * 250/1000
10250*1000 /250 = P , 1025000/25 =P
Therefore P = Rs, 41,000/- Therefore the principal amount burrowed is 41,000 apart from the interest paid.