How Simple Interest Works
Learn the basics of simple interest and how to calculate it.
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Definition
Simple interest is interest calculated only on the original principal amount. It does not compound.
Formula
SI = (P x R x T) / 100
P = Principal amount
R = Annual interest rate
T = Time in years
Example
Principal: 20,000
Rate: 5%
Time: 3 years
SI = (20000 x 5 x 3) / 100 = 3,000
Total amount = 20,000 + 3,000 = 23,000