On what sum of money (in ₹) at 16% annual interest rate will one get simple interest of ₹480 in 4 years?

Appeared in: DSSSB 12 August 2024

Explanation

The fundamental formula for Simple Interest (SI) is: SI = (Principal × Rate × Time) / 100.
To find the Principal (P), the formula is rearranged to: P = (SI × 100) / (Rate × Time).
Given: SI = ₹480, Rate (R) = 16%, and Time (T) = 4 years.
Substituting the values: P = (480 × 100) / (16 × 4).
Calculation: P = 48000 / 64, which simplifies to P = ₹750.

Option A: Calculating with a principal of ₹375 would result in a simple interest of (375 × 16 × 4) / 100 = ₹240, which is not the given ₹480.
Option C: Calculating with a principal of ₹1500 would result in a simple interest of (1500 × 16 × 4) / 100 = ₹960, which is double the given amount.
Option D: Calculating with a principal of ₹1000 would result in a simple interest of (1000 × 16 × 4) / 100 = ₹640, which is incorrect.

Clinical Relevance

Nursing practice connection: This is primarily an exam-oriented knowledge point with limited direct bedside application, so retain Calculation of Principal in Simple Interest as background academic context rather than a clinical decision trigger.
This question tests quantitative aptitude, a key component of the general aptitude section in many nursing and other competitive examinations.
Strong foundational math skills are essential for accurately interpreting data and performing calculations required in various sections of entrance exams.
What if the interest was compounded annually? If the interest was compounded, the formula would be A = P(1 + R/100)^T, and the calculation would be more complex, involving compound interest formulas rather than simple interest.

How to Approach the Question

First, carefully read the question to identify all the given financial variables: Simple Interest (SI = ₹480), Rate (R = 16%), and Time (T = 4 years).
Identify the unknown variable that needs to be calculated, which is the Principal amount (P) or 'sum of money'.
Recall the standard formula for Simple Interest: SI = (P × R × T) / 100.
Algebraically rearrange this formula to isolate the Principal (P) on one side: P = (SI × 100) / (R × T).
Substitute the known values into the rearranged formula.
Perform the arithmetic calculation: P = (480 × 100) / (16 × 4) = 48000 / 64.

Concept Tested & Keywords

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Practise the full DSSSB 12 August 2024

Attempt every question from this paper in a timed mock, then review the full solution for each one.