Introduction to interest — lesson. Mathematics CBSE, Class 7.

PDF chapter test TRY NOW

Interest is the amount of money which is paid for the use of borrowed money.

Let a person '

$A$ ' borrows some money from '

$B$ ' for a certain period of fixed time at a fixed rate, then '

$A$ ' will pay the borrowed money along with the additional money, which is called interest.

There are two types of interest:

Simple interest
Compound interest.

In this chapter, we are going to learn about Simple interest (

$I$ ).

Before that, we should learn some basic terms deals with interest.

Principal
Amount
Time

Principal:

The money borrowed or lend out for a certain period is called the "principal" or the "sum".

Amount:

The sum of the interest and principle is called as the amount.

$Amount = Principle + Interest$

Time:

The duration of the period for which the money is borrowed is called the time.

Rate Interest per Annum:

If interest is payable yearly for every

$100$ rupees, then it is called rate percent per annum.

Rate is denoted by

$r$ , and rate percentage is denoted by

$\frac{r}{100} % = r %$ .

Interest is generally given in percent for a period of

$1$ year per annum. Suppose the bank gives an amount of

$₹100$ at an interest rate of

$₹$ 6, it is written as 6

$\%$ per year or per annum or in short 6

$\%$ p.a. (per annum).

It means on every

$₹100$ borrowed,

$₹$ 6 is the required interest, to be paid for every one year.

Example:

Vijay takes a loan of

$₹$ 20000 at 13

$\%$ per year as the rate of interest. Let us find the interest he has to pay at the end of

$1$ year.

Sum borrowed

$= ₹$ 20000.

Rate of interest

$=$ 13

$\%$ per year.

This means if

$₹100$ is borrowed, he has to pay

$₹$ 13 as interest. So, for the borrowed amount of

$₹$ 20000, the interest for one year would be

$\frac{13}{100} \times 20000$

$= ₹$ 2600.

So at the end of

$1$ year, he has to give an amount of

$= ₹$

$20000 + 2600$

$= ₹$ 22600.

$1$

Previous topic

Exit to the topic

Next theory

Send feedback

Did you find an error?

Send it to us!

1. Introduction to interest

Theory: