Loan/Investment Details
Total Amount
$11,200
Principal
$10,000
Interest
$1,200
Interest Rate
12%
What is Simple Interest?
Simple interest is a method of calculating the interest charge on a loan or investment. Unlike compound interest, simple interest is calculated only on the principal amount, making it easier to understand and predict.
Simple Interest Formula
SI = (P × R × T) / 100
A = P + SI
A = P + SI
Where:
SI = Simple Interest
A = Total Amount
P = Principal amount
R = Annual interest rate (%)
T = Time in years
When to Use Simple Interest
- Short-term loans (under 1 year)
- Auto loans and short-term personal loans
- Some types of bonds and certificates of deposit
- When you want predictable, linear growth