INTEREST

The premium or sum of money given for the loan or use of another sum of money, generally estimated at so much per cent., or per 100*. The sum lent, and for which the interest is paid, is called the principal, and the sum charged as interest is called the rate. The rate will evidently be proportional to the time; for whatever interest is paid for the use of 100/. for one year, twice that interest will be required for the use of 100/. for two years. The principal added to the interest, or the whole sum paid back to the lender, is called the ainount. Interest is either simple or compound. Simple interest is that which is reckoned and allowed upon the principal only during the whole time of the loan; compound interest is reckoned not only on the principal sum lent, but also on the interest as it becomes due. It is con▼enient to treat of these separately. E 605 [s. 618]