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When an expression is equated with some other parameter or value then it becomes an equation. for Example Principal * Time * Interest Rate /100 is an expression. Now when we equate this with Simple Interest and say

SI = Principal * Time * Interest Rate /100 then this is an equation.

Now in an equation like the one above, value of few parameters (SI, Principal, Time, Interest Rate all are parameters) will be known and value of some parameter will be unknown or may keep changing in any situation. These unknown or changing terms are called variables.

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