Knowing the concept of simple interest and its formula

Knowing the concept of simple interest and its formula

Well, simple interest is indeed simple !

When money is borrowed, interest is charged for the use of that borrowed money for a certain period of time. When the money is paid back, the person would then have to pay the original amount of money he had borrowed together with the interest.

You may wonder -- Then what is interest?

Interest -- The amount of interest mainly depends on 3 main factors.

1) The amount of money borrowed

2) The length of time that the money is borrowed for

3) The interest rate

Therefore, the formula for finding simple interest is :

Interest = Principal* Rate * Time

Example : If $50 was borrowed for 2 years at a 10% interest rate, the interest would be

$50x10/ 50x2 = $10

OR

$50x 10% x2 = $5x2 = $10


Therefore, as a conclusion, simple interest is generally charged for borrowing money for short periods of time only. It is used for uncompounded stocks, shares and bonds as it is the amount of interest paid only on the original principal, not on the interest accrued or accumulated.

Maths Joke:
A group of mathematicians and a group of engineers are traveling together by train to attend a conference on mathematical methods in engineering. Each mathematician has a ticket whereas only one of the engineers has one. The mathematicians laugh at the unworldly engineers and look forward to the moment the conductor shows up.
Suddenly, one of the engineers shouts: "Conductor coming!"
All the engineers disappear into one washroom.
The conductor checks the ticket of each mathematician and then knocks at the washroom door: "Your ticket, please."
The engineers stick the one ticket they have under the door, the conductor checks it and leaves. A few minutes later, when it is safe, the engineers come out of the washroom. The mathematicians are impressed.
When the conference has come to an end, the mathematicians decide that they are at least as smart as the engineers and also buy just one ticket for the whole group. This time the engineers do not buy a ticket at all.
Again, one of the engineers shouts: "Conductor coming!".
All the mathematicians rush off to one washroom. One of the engineers goes to that washroom, knocks at the door, and says: "Your ticket, please..."

sources: http://www.aaamath.com/g84-simple-interest.html