Master The Simple Interest Formula: Calculation And Examples

simple interest formula

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The simple interest formula is used to calculate the amount of interest earned or paid on a principal amount over a certain period of time. The formula is:

Simple Interest = (P x R x T) / 100

where:
P = Principal amount
R = Rate of interest per annum
T = Time period (in years)

Example:

Let’s say you borrow $10,000 at a simple interest rate of 5% for 3 years. Using the simple interest formula, we can calculate the interest you would pay as follows:

Simple Interest = (P x R x T) / 100
Simple Interest = (10,000 x 5 x 3) / 100
Simple Interest = 1,500

Therefore, the total amount you would need to repay after 3 years would be $11,500 ($10,000 principal + $1,500 interest).

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