Simple Interest

Simple Interest

• 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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