**When money is borrowed, interest is charged for the use of that money for a certain period of time. When the money is paid back, the principal (amount of money that was borrowed) and the interest is paid back. The amount to interest depends on the interest rate, the amount of money borrowed (principal) and the length of time that the money is borrowed. **

**Simple interest is charged for borrowing money for short periods of time.**

The formula for finding simple interest is : Interest = Principal * Rate * Time

If $100 was borrowed for 2 years at a 10% interest rate, the interest would be \frac{100 \times10}{100\times2} = $ 20

The total amount charged would be $100 + $20 = $120.

Simple interest is generally charged for borrowing money for short periods of time.

Skills to recall:

What is principal amount

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