Background Information

Interest is the money the bank pays for using the borrower's money to lend out.
Example: $3,000 at 4% interest would result in a deposit of $3,120

$3,000 x .04 = $120
Total value of deposit $3,120

The same concept is used when people borrow money from banks or other financial interest. Borrowers must pay back the amount they are using, plus interest. This is called a loan.

 Formula for calculating interest
Interest = Principal x Rate x Time = P x R x T

Rate is the rate of interest (expressed as a percentage)

Time is the interest period in years or part of a year