SIMPLE INTEREST

Principal amount is the original amount you borrowed or invested.

Interest is the amount paid or borrowed to a lender for a credit or the amount gained on an
investment. The value of the interest depends largely on the interest rate, principal amount,
and the length of the time the principal is invested or borrowed. It is generally computed as a
percent of the principal.

Interest rate is the percent of the principal paid for the use of money on a certain length of
time in an investment or loan.

Time is generally expressed in terms of years.

Simple Interest is an interest which is computed entirely at once from the moment the money
is borrowed or invested until it will be paid. It is computed by multiplying the principal, the
rate, the time in years. In symbols,

𝑰 = 𝑷𝒓𝒕

where:
I is the simple interest
P is the principal
r is the rate
t is the length of time

Maturity date (Due date) is the end of term when the principal will be paid together with the
interest.

Maturity value is the sum of the principal and the interest denoted by M.

Mathematically,

M= P+I
M = P + Prt since I = Prt
M = P (1 + rt)