*%*

*%*

#### What is Simple Interest ?

Simple interest is a method to calculate the interest rate on a loan payment. Interest is always depends on the original principle or sum, so interest on interest is not included.

#### What is Principal Amount ?

Principal is the sum of money on which the interest to be earned.

#### What is interest rate ?

Interest rate is the percentage at which interest accrued over time.

#### What is No. of Years ?

Time or period is the length of period in years.

The simple interest formula allows us to calculate I, which is the interest earned or charged on a loan. According to this formula, the amount of interest is given by

where

*I*is the interest amount,*P*is the principal amount,*R*is the annual interest rate in % form, and*N*is the loan period expressed in years.

John borrows 1,00,000 for 5 Years, at 10% simple interest rate.

##### Simple Interest Amount(I) = Principal(P) * Interest Rate(R) * Term of the loan (N) / 100

Principal Amount(P) | : 1,00,000 |

Interest Rate(R) | : 10 % |

Term of the loan (N) | : 5 Years |

Simple Interest(I) = 1,00,000 * 0.10 * 5

Simple Interest(I) = 50,000