What sum of money will earn ₹945 as simple interest in 3 years at 7% per annum?

When you lend (or borrow) money, the borrower pays the lender extra for the use of the money — that extra is **interest**. **Simple interest** is calculated only on the original principal, not on past interest.

**$\text{SI}=\frac{P\times R\times T}{100}$**

where $P$ = principal (₹), $R$ = rate per annum (% per year), $T$ = time in years.

Example: ₹2000 at 5% for 3 years: SI = $\frac{2000\times 5\times 3}{100}=300$. Total amount $A=2000+300$ = ₹2300.