SIMPLE INTEREST
SIMPLE INTEREST
SIMPLE INTEREST
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MODULE OBJECTIVE<br />
<br />
Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the<br />
amount borrowed per period of time, usually one year.<br />
<br />
Simple interest is calculated on the original principal only. Accumulated interest from prior<br />
periods is not used in calculations for the following periods. Simple interest is normally used for<br />
a single period of less than a year, such as 30 or 60 days.<br />
<br />
where:<br />
P = principal (original amount borrowed or loaned)<br />
R= interest rate for one period<br />
T = number of periods<br />
IMPORTANT FORMULA<br />
Principal:<br />
The money borrowed or lent out for a certain period is called the principal or the sum.<br />
Interest:<br />
Extra money paid for using other's money is called interest.<br />
Simple Interest (S.I.):<br />
If the interest on a sum borrowed for certain period is reckoned uniformly, then it is called simple<br />
interest.<br />
Let Principal = P, Rate = R% per annum (p.a.) and Time = T years. Then