The amount of money or a percentage charged by the! lender (Banks) to the borrower (YOU) is known as Interest. @ MONEY does not come for free, and therefore when you borrow money, not only is that money to be returned, but an amount is charged for borrowing too. ® These charges are different around the world. LETS LOOK AT AN EXAMPLE Q oe ® Ram wants to borrow rupees 1000 (principle amount) from a bank for a year. The bank tells him that to borrow this amount, he will have to pay an interest of '% at the end of the year. How much would that amount to? ees @® To convert this percentage into an amount, all we =——S—=* ° need to do is divide the interest amount with the borrowed amount or principle amount. © Arter dividing, we get the numbers 100. This RS. 100 is the 10% interest the bank is charging Ram. @ Therefore, when Ram returns the money, he would have to pay Rs. 1000 (the borrowed amount), as welll as an addition 100 rupees (1000+100- 1,100) charged by the bank as interest for its lending (loan) services. Copyright