Table of Contents
Simple interest method
Under this method, the interest is charged only on the amount originally lent (Principle borrowed) to the borrower. Simple interest is usually charged on short-term borrowings.
Terms used in Simple Interest
Principle or Sum:– The money that is lent or borrowed.
Interest:– It is the money paid in addition to the Principle.
Rate:- It is the percentage of Principle paid as interest.
Time:- It is the duration for which the Principle is borrowed.
Rate of interest formula of Simple interest
S.I = P x r x t
S.I = Simple interest
P = Principle/Borrowed amount
i/r = rate of interest
n/t = number of periods
r = P x t / Simple Interest