Simple
Interest Formula
We’ll
work with the Simple
Interest Formula in this article. Below you can find an
online calculator for this purpose.
Interest
is money paid by an individual or organization for the use of a sum of
money
called the principal.
The interest is usually paid at the end of specified
equal periods of time
(such as monthly or annually).
The
sum of the
principal and the interest is called the amount.
To calculate the
simple interest,
we have
these two easy formulas:
I = P × r × t
and A = P (1 + r × t)
where
I = simple interest
P = principal
r = interest rate per year
t = time in years
A = amount
Example:
A
student
purchases a new laptop by obtaining a simple interest loan.
This
hightech computer costs $1500, and the interest rate on the loan is
12%. If the loan is to be paid back in monthly instalments
over 2 years, calculate the amount of interest paid over the 2
years, and the total amount to be paid back.
We use our calculator below, and enter the appropriate data...
Enter
Principal = 1,500.00
Enter
interest rate per year = 12.00%
Enter time in
years = 2
Our simple interest calculator delivers these results:
Simple
Interest = 360.00
Amount =
1,860.00
This
means that we have to pay back 1,500 (principal) + 360 (simple
interest) = 1,860 (amount) in two years, in regular monthly instalments.
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