Financial Terms / simple interest

Understanding Simple Interest

Simple interest is a financial tool used to calculate the interest earned on an investment by multiplying the principal amount, rate, and term together.



How do I calculate the simple interest?

If you need to calculate simple interest, the formula is I=Prt, where I stands for the interest amount, P is the principal amount, r is the interest rate, and t is the time in years. You can use tools like Sourcetable to easily calculate simple interest.

What is Simple Interest?

Simple interest is a type of interest calculated on the initial amount of a loan or deposit, called the principal. It is calculated for a specific period of time and is typically expressed as an annual percentage rate (APR).

What is the Difference Between Simple Interest and Compound Interest?

The main difference between simple and compound interest is that compound interest is calculated on the principal as well as any accumulated interest. Compound interest is calculated more frequently than simple interest, typically every month or quarter.

Key Points

How do I calculate simple interest?
P is the principal amount
The principal amount, P, is the original amount of money borrowed or lent in a simple interest calculation. It is the base amount from which interest is then calculated.
Simple Interest
Simple interest is the interest calculated on a principal amount for a fixed period of time. It is calculated by multiplying the principal amount, P, by the interest rate, r, and the amount of time, t, over which the interest is calculated.

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