Simple Interest and its Formula

When I first saw this topic, I had no idea what it is about. Actually, simple interest is related to the interest rate when you borrow money. Not your interest in mathematics. Haha!

1. When money is borrowed, interest is charged for the use of that money for a certain period of time.


2. When the money is paid back, the principal (amount of money that was borrowed)(not your school principal) and the interest is paid back. (Imagine if you borrow money and your school principal returns the money for you. HaHa again!)


3. The amount to interest depends on the interest rate, the amount of money borrowed (principal) and the length of time that the money is borrowed.

This is the formula for simple interest is as follows. Interest = Principal * Rate * Time.

(*stands for times(x))

For example, if $100 borrowed from Jane for 2 years at a 10% interest rate, the interest would be $100*10/100*2 = $20. The total amount that she would get would be $100+$20=$120.

Compound interest is similar. Read about it in the next blog post!