Worked examples & more problems to solve on simple interest in Naira
Example 1:
If you deposit ₦10,000 in a bank account that pays an annual interest rate of 5%, what will be the total amount in the account after 2 years?
Solution:
The formula to calculate simple interest is: I = P * r * t
Where:
I = Interest,
P = Principal Amount,
r = Rate of Interest,
t = Time (in years)
In this case, P = ₦10,000, r = 0.05 (5% expressed as a decimal), and t = 2 years.
Using the formula:
I = ₦10,000 * 0.05 * 2 = ₦1,000
The total amount in the account after 2 years will be ₦10,000 + ₦1,000 = ₦11,000.
Example 2:
If you borrow ₦15,000 from a friend and agree to pay an interest rate of 8% per annum for a period of 3 years, how much will you owe at the end of the loan term?
Solution:
Using the same formula:
I = P * r * t
In this case, P = ₦15,000, r = 0.08 (8% expressed as a decimal), and t = 3 years.
I = ₦15,000 * 0.08 * 3 = ₦3,600
You will owe ₦15,000 + ₦3,600 = ₦18,600 at the end of the loan term.
Additional problem:
If you invest ₦25,000 at an interest rate of 6% per annum for 5 years, what will be the total interest earned?
Solution:
Using the formula mentioned earlier:
I = P * r * t
In this case, P = ₦25,000, r = 0.06 (6% expressed as a decimal), and t = 5 years.
I = ₦25,000 * 0.06 * 5 = ₦7,500
The total interest earned will be ₦7,500.