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### Course: Class 7 (Old)>Unit 7

Lesson 6: Simple interest

# Finding simple interest for one year

Let's learn what the 'interest rate per annum' means and how we can calculate simple interest for a year using the rate of interest. Created by Aanand Srinivas.

## Want to join the conversation?

• I know the lesson is the same in any culture, country etc.. However lesson in America taught to children in the US should probably be taught in dollars in my opinion just because most kids in America, probably all use the Dollar not the Rupee. Why in Rupees?
• because this is by an indian teacher and in india, their currency is rupees.
• thanks for doing this but do you think do it with fractions
• How do I calculate simple interest with months instead of year but the rate is still per annum
• For every year there is 12 months so instead of inputting a number, you could input a fraction out of 12 for the months
(1 vote)
• Why isn't there a video for several years of interest?
• pls subtitles for this video
• Not every time , anyone keeps money for a year . Pls make videos for that
(1 vote)
• Do you mean a video for calculating simple interest for many years? Check https://www.khanacademy.org/math/in-in-class-7th-math-cbse/in-in-7th-comparing-quantities/in-in-comparing-quantities-simple-interest/v/finding-simple-interest-for-many-years-comparing-quantities-class-7-india-khan-academy out and be sure to solve the exercises that follow it.
Now I hope this explanation makes the concept clear.
Let:
rate of interest = r % per annum;
principal = p; and
simple interest = i.
The rate of interest per annum is the interest for a principal of 100 at the end of one year.
This means that
r:principal of 100::?:principal of p
That is
r:100::i:p (taking "?" as the simple interest on the principal p)
This implies that pr=100i, which can be regrouped as follows:
i = pr/100.
This is the formula you typically see in textbooks.
Notice that the r here is the interest for a principal of 100 at the end of ONE YEAR. That's why r is the rate of interest per annum or PER YEAR (i.e. FOR EVERY {1} YEAR).
So what do we do for calculating simple interest for multiple—say, t—years?
Well, proportions to the rescue!
pr/100:1 year::?:t years
In other words, pr/100:1::?:t
tpr/100 = ?
Notice that the "?" is the simple interest for t years. Let's denote it by "SI".
We now have
SI = ptr/100
where
SI = Simple Interest
p = principal
t = Number of years or time
r = rate of interest
Hope that helps! :)
• how do animals know how to animal if no one teaches them?
• I understand interest. I understand simple interest. But what I don't understand is why would anyone pay the principal of 500rs again in the second year, when the principal was already paid back, in full, in the first year?

In my understanding, you keep paying interest every year that you have NOT paid back the principal. Once the principal has been paid back, the obligation is over.

Also, if you paid 50rs interest in the first year, and had not paid back the principal (still borrowing the money), then you'd simply pay another 50rs in the second year, not double.