simple interest formula
The formula for calculating simple interest is:
Interest = Principal * Rate * Time
In this formula:
– Principal refers to the initial amount of money or the original balance
The formula for calculating simple interest is:
Interest = Principal * Rate * Time
In this formula:
– Principal refers to the initial amount of money or the original balance.
– Rate represents the interest rate per time period (usually expressed as a decimal or a percentage).
– Time refers to the length or duration of the investment or loan in a specific time period (years, months, days).
To calculate the interest, simply multiply the principal by the rate and the time. The resulting value will represent the interest earned or paid.
For example, suppose you have $1,000 as a principal, an interest rate of 5% (expressed as 0.05), and a time period of 2 years. Using the formula, we can calculate the interest:
Interest = $1,000 * 0.05 * 2 = $100
Therefore, the interest earned in this case would be $100.
It’s important to note that simple interest does not take into consideration compounding. The interest earned is based solely on the initial principal amount and remains constant over time.
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