Formulas used for solving the interest use years as the unit of time. It should be observed to have consistent units of time in order to avoid miscalculations. It should be noted that the rate should be in decimal form before using it to the formula.
Here are the scenarios to be considered for solving the rate of interest:
Steps:
1. Divide the interest by the product of the principal and rate of interest.
2. Unit of time is in years.
We know that,
`Interest=P*Rate*Time`
where P is Principal
So,
where,
P is Principal
I is Interest
Steps:
1. Divide the future amount by the principal.
2. Subtract 1 from the quotient.
3. Divide the difference by the rate of interest.
4. Unit of time is in years.
We know that,
`Future Amount=P*[1+Rate*Time]`
`(Future Amount)/P=1+Rate*Time`
`(Future Amount)/P-1=Rate*Time`
where
P is Principal
R is Rate
Steps:
1. Subtract the future amount by the interest. The result is the principal.
2. Divide the interest by the product of the principal and rate of interest.
3. Unit of time is in years.
We know that,
Interest=Principal*Rate*Time
Time=Interest/(Rate*Principal)
As,
`P=Future Amount-Interest`
Hence,
where
I is Interest
Note: The formula for solving the time is similar with the formula for solving the rate of interest. Just interchange the terms.
Principal amount is $300.
Interest is $15.
Rate of interest is 15%.
Using the formula for solving the time;
`Time =I/(P * Rate)`
where
P is Principal
I is Interest
`Time =15/(300 * 0.15)`
`Time =1/3 years`
Converting years into months;
`1/3Years* ((12 months)/(1 year) ) = 4 months`
Therefore, Alice paid Alex after 4 months.
Principal amount is $14,000.
Future amount is $20,300.
Rate of interest is 9%.
Using the formula for solving the time;
`Time = ((Future Amount)/P - 1)/Rate`
`Time = (20,300/(14 000)- 1)/0.09`
`Time = (1.45 -1)/0.09`
`Time = 0.45/0.09`
`Time = 5 years`
Therefore, the organization will pay the amount after 5 years.
Future amount is $3,220.
Interest is $420
The rate of interest is 7.5%.
Using the formula for solving the rate of interest;
`Time = ( Interest)/(Rate *(Future Amount-Interest))`
`Time = ( 420)/(0.075 * (3220-420))`
`Time = ( 420)/(0.075 * 2800)`
`Time = ( 420)/210`
`Time = 2 years`
Therefore, the amount was invested for 2 years.
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