Simple Interest

Table of Contents

  • Simple Interest
  • Terms Associated with Simple Interest
  • Summary
  • What’s Next?

In the previous segment, we had a look at finding the cost price when we are given the Loss Percentage. In this segment of the chapter ‘Comparing Quantities’, we will learn about Simple Interest.

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    What is Simple interest?

    Simple interest is the interest amount for a particular principal amount of money at some rate of interest.

    What Terms are associated with simple interest?

    Let us understand this with the following example:

    A person deposits ₹ 100 in the bank today. One year later the bank gives him ₹ 108.

    Here,

    • The Principal (the initial amount) is ₹ 100.
    • After a year what Edward receives consists of two parts:
      • He gets back his principal of ₹ 100.
      • The extra ₹ 8 that he gains, is called the interest.
    • ₹ 108 is the sum of principal and interest. It is called the amount.

    Amount = Principal + Interest

    Edward got ₹ 8 on his investment of ₹ 100 after a year. Hence, the rate of interest is 8% per

    annum.

    Summary

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