Question

A took a loan from a bank at the rate of 20% per annum simple interest. After 4 years he had to pay Rs.4000 interest. The principal amount borrowed by him was 
1. Rs.5000
2. Rs.6000
3. Rs.5500
4. Rs.6500

Answer 1

Correct Answer - Option 1 : Rs.5000

Given:

Simple interest = Rs. 4000

Time = 4 years

Rate = 20%

Concept:

Simple interest is the interest calculated on the principal portion of the loan or the original contribution to the saving account.

Formula Used:

Simple Interest = (P × R × T)/100

Calculation: 

Let the principal be 'P' 

∴ 4000 = (P × 20 × 4)/(100)

⇒ 4000 = 4P/5

⇒ P = 20000 ÷ 4

⇒ P = Rs.5000 

∴ The principal or the amount borrowed from the bank is Rs.5000.