Simple Interest

In compound interest calculations, the principal refers to the original amount of money that is invested or borrowed before any interest is added.
It is the base amount on which interest is calculated periodically, and over time, the interest gets added to the principal to calculate interest for subsequent periods (compounding effect).
For example, if you invest ₹10,000 at a certain rate of compound interest, Rs. 10,000 is the principal amount.

Simple Interest (SI) is calculated using the formula: where,
(Principal),
(Rate of interest per annum),
years (Time period). Substituting the values: Therefore, the simple interest is Rs. 120.