**Category : **7th Class

In the case of simple interest, we calculate interest paid by borrower over certain period of time without changing its principle.

**Calculate the simple interest on a sum of $1200 at the rate of 5 % per annum or two years. **

**Solution: **

The following steps are to be followed

**Step 1:** The interest for first year when

P =$ 1200, R = 5 % and T = 1 year

S.I. \[=\frac{P\times R\times T}{100}=\frac{1200\times 5\times 1}{100}=\$60\]

Therefore, interest for the first year is $ 60.

**Step 2:** Interest for the second year

P = $ 1200, R = 5 % and T = 1 year

S.I. \[=\frac{P\times R\times T}{100}=\frac{1200\times 5\times 1}{100}=\$60\]

Therefore, interest for the second year is $60.

Total interest paid by borrower after 2 years =$ 60 + $ 60 = $ 120.

*play_arrow*Introduction*play_arrow*Simple Interest*play_arrow*Compound Interest

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