Simple Interest

When a person has to borrow some money as a loan from his friends. relatives or bank, he promises to return it after a specified time period along with some extra money for using the money of the lender.

The money borrowed is called the Principal, denoted by P, and the extra money paid is called the Interest, denoted by I.

The total money paid back, that is, the sum of Principal and the Interest is called the Amount, and is denoted by A.

A = P + I

The interest is mostly expressed as a rate percent per year (per annum). Interest depends on, how much money (P) has been borrowed and the duration of time (T) for which it is used. Interest is calculated according to a mutually agreed rate percent, per annum (R).

R = r% = r/100

Interest = (Principal) × (Rate % per annum) × time

I = P × R × T