How to Calculate Simple Interest

Calculates simple interest as principal × annual rate × years. The interest is never added to the principal, so the same amount is earned every year.

Explanation

Simple interest is always charged on the original principal alone. Because the interest is never added back in, the same amount is earned every single year.

I = P \times \dfrac{r}{100} \times n

$I$ is the interest
$P$ is the principal
$r$ is the annual rate in per cent
$n$ is the number of years

The total at the end is $P + I$ .

Example

Put a principal of 1000000 at 3% for 10 years. One year earns $1000000 \times 0.03 = 30000$ , and ten years earn $30000 \times 10 = 300000$ . The total comes to $1000000 + 300000 = 1300000$ .

Notes

The difference from compound interest is that nothing is added back to the principal. Compounding the same terms would reach about 1343916, roughly 43916 more, and the gap widens the longer the money is left alone.

The rate and the term must use the same period. For six months at an annual rate, enter 0.5 years.

The calculator assumes no currency: the answer comes out in whatever unit you typed in. Tax on the interest and any fees are not deducted.