What is Simple Interest?

Simple Interest

Simple interest is interest calculated only on the principal portion of a loan.

If P = principal, T = time in years;  R = rate of interest

Then simple interest SI = $\frac{PTR}{100}$

Amount = P + SI

= P + $\frac{PTR}{100}$

= P [$1 + \frac{TR}{100}$]

Simple interest does not compound, meaning that interest is calculated only on the principal, no interest is paid on interest already accrued or accumulated on the principal.

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Updated on: 10-Oct-2022

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