Whenever a person borrow or lend out money for a certain period of time, an extra amount can be paid over the original amount. This extra amount is known as interest. If the interest for the entire period is calculated on the original amount only and not on the subsequent interest levied, then it is known as Simple Interest.
Frequent terms and their meanings used in context with problems on Simple Interest:
Principal: The money borrowed or lent out for a certain period is known as the principal or the sum.
Simple Interest: If the interest on a sum borrowed or lent out for some period is calculated uniformly, then it is known as Simple Interest.
Rate: The percentage of extra amount to be for calculating Interest is known as rate.
Time: The period (generally in years) for which the interest is to be calculated is known as time.
Amount: The final amount i.e. principal and interest together is known as amount.
Generally, Simple Interest, Principal & Amount can be in any currency, Rate is in percentage (%) and Time is in years.
Formulae:
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