Simple Interest is the interest computed on the principal ONLY and without compounding. This cost is based on three elements: 1) The principal: the amount borrowed 2) The rate of interest and 3) The amount of time for which the principal is borrowed. The formula to find the simple interest is as follows: Simple Interest = Principal x Rate of interest x Time(in years)

Problem#3: Suppose you have persuaded your sibling to lend you $3,000 to purchase electronic equipment that you need for a business start-up. Your sister or brother agreed to lend you the money but will charge you 8% interest and you agreed to repay the loan at the end of 2 years. What is the amount to be paid back to your sibling at the end of the period?