Interest Calculator

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When it comes to mastering your finances, it’s important to understand simple interest. While you could use an interest calculator, the math involved is not complex. Once you have an understanding of how interest works, you will be able to make more informed financial decisions.

Guide to Simple Interest

A basic simple interest definition is the money that is paid on a loan or money that is earned on deposits.

For instance, when you borrow money, you must repay not only the initial amount you borrowed but also extra money. This is the interest on the loan. Likewise, if you deposit money in a savings account, you will earn money on the amount deposited. Interest refers to the additional money that is paid on a loan or earned on a deposit or investment. The amount of interest paid or earned is calculated based on the original amount or principal.

The term simply refers to the simplest way to calculate interest. There are other ways to calculate interest, including compound interest.

Simple Interest Formula

The following simple interest formula can be used to calculate simple interest:

I = P x r x t

Simple interest (I) can be calculated by multiplying the principal (p) by the rate (r) by the number of time periods (t).

Although the process of calculating simple interest might seem a bit confusing at first, it’s actually not that difficult. Below is an example of the simple interest formula being used.

$500 x 5% x 1 year = $25

As you can see, it is a very easy process to calculate simple interest. Of course, if you prefer, you can always use a simple interest calculator to ensure your numbers are correct. Another option would be to use an Excel spreadsheet to assist you with your calculations.