Simple interest is the interest given for a particular sum of money on a given rate. The sum of money is known as ‘principle’ and the interest is calculated for the given ‘rate’ for a given time.

For example, think that a person borrowed a sum of 50,000 rupees from a bank which provides an interest rate of 5% p.a. . He borrowed the money for 1 year, so what will be the amount he needs to pay at the end of this 1 year?

Well, the formula to calculate simple interest is :

(P*R*T)/100

Where

P= principle or amount of money

R= rate of interest; it is given in percentage and thus is divided by 100 while using in the formula

T= time until which the money is provided; it is calculated in year as the rate of interest is given as percentage per annum (where annum is the adverb of 1 year)

Going back to our question, we have:

P = 50,000

R= 5%

T= 1year

Thus interest (S.I.) = (50,000 * 5 * 1)/100

= 2,500 rupees

Thus the person has to return an extra 2500 rupees to the bank

The total amount to be returned = 50,000 + 2,500

= 52,500 rupees

I hope you found this helpful.