To calculate the simple interest on a loan, you can use the following formula:
Simple Interest (SI) = P × r × t
Where:
- P = Principal amount (the initial amount of the loan)
- r = Rate of interest (as a decimal)
- t = Time (in years)
In your case:
- P = ₹1000
- r = 5% = 0.05 (as a decimal)
- t = 3 years
Now, let’s plug in these values into the formula:
SI = ₹1000 × 0.05 × 3
Calculating this gives:
SI = ₹1000 × 0.15 = ₹150
So, the simple interest on a ₹1000 loan at a 5% interest rate after 3 years is ₹150.
This means that after 3 years, you will have to pay back a total of:
Total Amount = Principal + Simple Interest = ₹1000 + ₹150 = ₹1150
In summary, the simple interest accrued over 3 years on a ₹1000 loan at a 5% interest rate is ₹150, leading to a total repayment amount of ₹1150.