An interest rate is the percentage of principal that is charged as interest for its use by the lender. An interest rate is typically defined as an annual percentage of the borrowed principal and is calculated by dividing the amount of interest by the amount of principal.

Amount of Interest = Interest Rate x Principal

Amount of Interest = (5 / 100) x 100,000 = $5,000 for each year.

Amount of Interest = Interest Rate x Principal

Amount of Interest = (5 / 100) x 100,000 = $5,000 for each year.