How to Calculate Simple Interest
What is Simple Interest?
Simple interest is calculated only on the original principal, not on accumulated interest. It grows linearly with time, unlike compound interest which grows exponentially.
Step-by-Step Guide
- 1Interest I = P × r × t
- 2Total amount A = P + I = P(1 + rt)
- 3r must be in decimal form (5% = 0.05)
- 4t must be in years
Worked Examples
Input
$1,000 at 5% for 2 years
Result
$100 interest
A = $1,100
Input
$500 at 3% for 18 months
Result
$22.50 interest
t=1.5 years
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