5% is the interest rate.
What does the term "simple interest" mean?
- The principal of a loan or the initial deposit into a savings account serves as the foundation for simple interest.
- Simple interest does not compound, so the creditor only has to pay interest on the principal sum and the borrower never has to pay interest on the interest that has already accrued.
P = $5000
T = 4 Year
S.I. = $1000
R = ?
According to question,
S.I. = P * R* T/100
1000 = 5000 * R * 4/100
R = 1000 * 100/5000 * 4
R = 5%
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