Simple Interest:

When money is borrowed, the lender expect to receive a charge from the borrower as compensation.

The compensation is generally called the interest.

The original amount Lent out is referred to as principal. The period (either in years, months, weeks, etc) for which the money is used by the borrower is called time, while the amount of the competition ie interest in terms of certain percentage of the amount lent out ie principal is called rate.

General speaking, if the principal P is lent or borrowed for T years at a rate of R% per annum, therefore the simple interest is derived by the formula