Interest Rate Formula
Using the interest rate formula, we get the interest rate, which is the percentage of the principal amount, charged by the lender or bank to the borrower for the use of its assets or money for a specific time period. The rate a bank pays to its depositors for keeping money in a savings account, recurring deposit, or fixed deposit is also termed as the interest rate and in this section, we will discuss the interest rate formula.
What is the Interest Rate Formula?
The interest rate for a given amount on simple interest can be calculated by the following formula,
Interest Rate = (Simple Interest × 100)/(Principle × Time)
Example: What is the interest rate on principle amount 12000 in 2 years, if the simple interest is 1200?
Solution: Using simple interest formula,
The interest rate of a given amount can be expressed as,
\[\begin{align*}\text{Interest rate}&=\dfrac{\text{Simple Interest} \times 100}{ \text {Principle} \times \text{Time}} \\ \text{Interest rate}&=\dfrac{1200 \times 100}{ \text 12000 \times 2}\\&=5\%\end{align*}\]
Answer: The interest rate is 5%

Example1: If Sam lends $5000 to his friend and received $6000 after a year. Using the interest rate formula, find at what interest rate did Sam lends the amount to his friend?
Solution: To find: Interest rate in a year
Principle amount = $5000(given)
Simple intrest =$6000 $5000= $1000
Time=1 year
Using interest rate formula,
\[\text{Interest rate}=\dfrac{\text{Simple Interest} \times 100}{ \text {Principle} \times \text {Time}}\]
\[\begin{align*} \text{Intrest rate} &= \dfrac{1000 \times 100}{ \text 5000 \times 1} \\ & = 20\text% \end{align*}\]
Answer: Sam will take 20% interest rate from his friend in a year.

Example 2: James borrowed $600 from the bank at some rate per annum and that amount becomes double in 2 years. Calculate the rate at which James borrowed the money.
Solution: To find: Interest rate
Principle amount = $600(given)
Simple interest =$1200 $600= $600
Time = 2 year
Using interest rate formula,
\[\begin{align*} \text{Interest rate}&=\dfrac{ \text {Simple Interest} \times 100}{ \text {Principle} \times \text {Time}}\\ \text{Interest rate}&=\dfrac{600 \times 100}{ 600 \times 2}\\&=50\text% \end{align*}\]
Answer: James borrowed the money at 50% rate.