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Simple interest calculator

What is simple interest?

Simple interest is a method of calculating any interest on a principal amount over time for a given interest rate. Simple Interest is used in various sectors, like bank FD (Under 6 months) and other short term interest period. We calculate it by using a calculator or directly by a simple interest calculator.

Formula for simple interest

Simple interest is found by multiplying the principal amount by the rate of interest by the number of days (in months or years) and whole divided by 100(as interest rate is in percentage).

Or Let’s say : Simple Interest = (P x R x T)/ 100

Here P = Principal Amount

R = Rate of Interest

T = Time period (Months/days/Years)

Example:

Suppose Mr. Tejas has deposited his money in a bank, with the principal amount 10,000Rs for 5 years, at the rate of interest 6%. So what is the final Or say maturity amount after 5 years? Lets find out,

Principal Amount: 10,000Rs | Rate of Interest: 6% | Time Period: 5 years

Simple Interest = (P x R x T)/100 => (10,000 x 6 x 5)/100 => 3,00,000/100 => 3,000Rs

Here the Interest amount which Mr. Tejas would get after 5 years is Rs 3000 and Total amount is Principal amount + Interest amount . Which is 10,000 + 3,000 = 13,000Rs.

But generally banks don’t use Simple Interest (SI) for long term deposit or investment, they use Compound Interest !! This is a totally different method of interest and we will learn about it on a different day. We can calculate it by using simple interest calculator.

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