When a person borrows some money from another person then the borrower has to pay some extra money for the use of that money to the lender. This extra money is called Interest.

In other words, the amount charged by lender for giving his money for a specific amount of time is called Interest.

The amount of money borrowed is known as Principle.

Total of Interest and Principle is known as Total Amount.
Amount = Principle + Interest.

The borrower has to pay interest according to some percent of principle for the fixed period of time. This percentage is known as Interest Rate. This fixed period may be a year, six months, three months or a month and correspondingly the rate of interest is charged annually, half yearly, quarterly or monthly.

For example, the rate of interest is 10% per annum means the interest payable on Rs 100 for one year is Rs 10.

## Basic Formulas of Simple Interest

If A = Amount
P = Principle
I = Interest
T = Time in years
R = Interest Rate Per Year, then

Amount = Principle + Interest
A = P + I

Compound Interest