Simple Interest Calculator

Simple interest is calculated only on the principal amount, unlike compound interest which earns interest on interest. This calculator helps you determine interest earned on savings or owed on loans. It's useful for short-term loans, CDs, and basic savings planning.

1. Enter Principal: The initial amount invested or borrowed
2. Enter Interest Rate: Annual rate as a percentage (e.g., 5 for 5%)
3. Enter Time: Duration in years (for months, divide by 12: 6 months = 0.5 years)
4. Click Calculate: View the interest earned and total amount

Example 1: Savings Account

Deposit $5,000 at 2.5% for 3 years:
Simple Interest = $5,000 × 0.025 × 3 = $375
Total = $5,375

Example 2: Short-Term Loan

Borrow $2,000 at 8% for 6 months (0.5 years):
Simple Interest = $2,000 × 0.08 × 0.5 = $80
Total owed = $2,080

The formula for calculating simple interest is:

Simple Interest = P × r × t

Where:

• P represents the principal amount, which is the initial sum of money invested or borrowed.
• r represents the annual interest rate, expressed as a decimal. To convert a percentage to a decimal, divide it by 100. For example, an interest rate of 5% is equivalent to 0.05.
• t represents the time period, expressed in years. If the time period is given in months, it must be converted to years by dividing the number of months by 12.

For example, if you invest $1,000 at an annual interest rate of 3% for 2 years, the simple interest would be calculated as follows:

Simple Interest = $1,000 × 0.03 × 2 = $60

The total amount after 2 years would be the principal plus the simple interest:

Total Amount = $1,000 + $60 = $1,060