Principal is the amount invested or loan taken Time is the duration of the investment or the time for the loan to be paid. Its mostly in years (annum). If you are given months or weeks, convert to years Rate is the percentage rate (\%) that will be used to calculate the interest earned on the investment or the interest to pay on the loan The principal =600 The rate =5 Since the time was given in months, convert to years since the rate was per annum There are 12 months in a year so divide the 8 months by 12 months to get the yearly equavalent of 8 months 4 goes into 8, 2 times and 12, 3 times Substitute the values into the simple interest formula 3 goes into 60,20 times and itself once The zeros cancels each other Simple interest =2×2×5=4×5=20