Learn what simple interest is and how to calculate it using examples with a simple interest formula. You can also use a simple interest calculator.

Example of simple interest. The formula for simple interest requires your initial principal balance, annual interest rate, and time in years.

Here’s how to calculate the simple interest: 1. Convert the annual interest rate (5%) to decimal: 5% ÷ 100 = 0.05. 2. Get the time in years: 2 years. 3. Apply the simple interest formula: SI = P * R * ...

Here’s how to find simple interest To find the interest amount, the user must subtract the principal amount from the total amount. Here is the formula: A-P. The result is the amount of interest ...

Simple interest is calculated only on the original principal amount. It is commonly used for short-term loans and investments. The simple interest formula is: SI = (P × R × T) / 100, where P is ...

Simple Interest Example Here’s how simple interest would be calculated for a one-year loan of $10,000 at 6%. ... .06/365 = .0001644 Then, take that number and plug it into the simple interest formula: ...

For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest. Who benefits ...