


Description 



Interest: The percent of the money on deposit (the principal) paid to a lender for the use of the principle. 
Many financial transactions involve interest such as loans, money market accounts, savings accounts, etc. The principal is the original amount borrowed, loaned, etc. Interest is a given rate of interest paid at given intervals. With simple interest, the amount of depost (loan) remains the same, and the interest is paid at the given intervals. Simple interest can be calculated using the following equation: A=Prt where A = end amount, P = principal, r = interest rate, n = number of years For example: Let's say you make a deposit of $6,000 into a savings account at your local bank with an interest of 4% every year of simple interest for 5 years. Then the parameters will be principal P = $6000, interest rate per period I = 0.04, and number of periods n = 5. The amount of interest you will have received by the end of 5 years will be Pni = ($6000)(5)(0.04) = $1200, so you will have A = $7200.


