Table of Contents
- Simple Interest
- Terms Associated with Simple Interest
- 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.
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.
- 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