Published: 08 Aug 2019

**1. Principal :** The money borrowed or lent out for a certain period is called the **principal** or the **SUM.**

**2. Interest** : Extra money paid for using other’s money is called **interest**. Interest is the extra money paid by the borrower to the owner (lender) as a form of compensation for the use of the money borrowed.

**3. Simple Interest (S.I.)** : If the interest on a sum borrowed for a certain period is reckoned uniformly, then it is called **Simple interest.**

**Simple Interest Equation*** (Principal + Interest)*

A = P(1 + rt)

Where:

· A = Total Accrued Amount (principal + interest)

· P = Principal Amount

· I = Interest Amount

· r = Rate of Interest per year in decimal; r = R/100

· R = Rate of Interest per annum (p.a) as a percent; R = r * 100

· t = Time Period involved in months or years

From the base formula, A = P(1 + rt) derived from A = P + Iand I = Prt so A = P + I = P + Prt = P(1 + rt)

Let Principal = p, Rate = R% per annum (p.a) and Time = T years. Then.

(i) S.I = P*R*T/100

(ii) P = 100*S.I./R*T;

(iii) R = 100*S.I./P*T

(iv) T = 100*S.I. / P*R

Formula for calculating amount is **A = P + I**

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