Simple interest is a method to calculate the interest rate on a loan payment. Interest is always depends on the original principle or sum, so interest on interest is not included.
Principal is the sum of money on which the interest to be earned.
Interest rate is the percentage at which interest accrued over time.
Time or period is the length of period in years.
The simple interest formula allows us to calculate I, which is the interest earned or charged on a loan. According to this formula, the amount of interest is given by where