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Interest
Definition OfInterest
Interest is a process in which an amount of money borrowed (or lent) increases over time.
More AboutInterest
The amount borrowed (or lent) is called Principal.
A fixed percentage of money is added to the Principal at regular time interval and that is called as rate of interest.
There are mainly three types of interests: Simple interest, Compound interest, and Continuously compound interest.
Video Examples: Simple Interest Formula
Example ofInterest
The interest earned on $1050 at 8% per annum for 2 years = 
. Therefore, the interest is $168.
Solved Example onInterest
Ques: Paul gave $850 to his friend at an interest of 12% per year. Find the interest per year.
Choices:
A. $102
B. $51
C. $120
D. $204
Correct Answer: A
Solution:
Step 1: Amount given by Paul to his friend = $850
Step 2: Rate of interest = 12%
Step 3: Interest per year = $850 × 12/100
Step 4: = $102.