**Interest** is the amount that is paid on the money deposited or borrowed.

**Simple interest** or

**flat rate** is calculated on the original principal only. Accumulated interest from prior periods is not used in calculations for the following periods.

Thus the formula for simple interest is

,

where

I - simple interest

p - principal, amount lent or borrowed

r - rate, percentage of the principal charged as interest each time period (usually a year)

n - number of periods

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