If a person borrows money, he usually pays something for the loan.
The sum of money he borrows is called the _Principal_; the money he pays
for the use of the principal is called _Interest_. Interest is generally
reckoned at so much for the use of each $100 for one year. This amount
is called the _Rate per cent per Annum_.
Thus, if we say that $200 is borrowed for three years at 4 per cent per
annum, we mean that the borrower, at the end of each year, pays the
lender $4 for each $100 borrowed--_i.e._, $8 interest for each year.
In the above example the interest is supposed to be paid to the lender
at the end of each year. Interest thus reckoned is called _Simple
Interest_.
The sum obtained by adding the interest for any given time to the
principal is called the _Amount_ in that time.