Simple Interest Example: When you borrow money from the bank, they charge you interest. So, let’s say you borrow $100,000, and the bank says it will charge you 6.5% interest.
$100,000 * 6.5% = $6,500.
- Principal borrowed: $100,000
- Interest rate: 6.5%
- Interest: $6,500
- Total repayment: $100,000 + $6,500 = $106,500
When you repay your loan to the bank, you will repay $100,000 (principal) + $6,500 (interest). So your total repayment will be $106,500.