Calculate Simple Interest

In this section, you will learn how to calculate simple interest. Simple interest, like its name, is the easiest form of interests to calculate. You can use the simple interest formula to calculate simple interest for many different financial circumstances.

How to calculate simple interest?

To calculate simple interest, you need to know:

• the principal invested (P)
• the interest rate (r)
• the number of time period for which the simple interest is to be calculated (n)

Calculate simple interest using simple interest formula

When you have P, n, and r, you can just plug those numbers into the simple interest formula to calculate simple interest. The formula for calculating simple interest is:

The time period used to calculate simple interest using the simple interest formula is a little tricky to find. If you are calculating simple interest on a savings account after n years with the simple interest added at the end of each year, then n is just n in your simple interest formula. However, if the simple interest is calculated every 6 months, n is not just n anymore but 2n to reflect that each time period is only 6 months.

Uses of how to calculate simple interest

• you can use the simple interest formula to calculate simple interest on loans such as car loans
• you can calculate the APR rate from simple interest rates
• learn how to calculate simple annual interest rate
• learn how to calculate simple interest on a savings account