**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.

## 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**

## Related content

Computing Simple Interest |

Simple Interest – Example 1 |

Compound Interest |