Simple interest is interest calculated based on a percentage interest rate, a nominal amount borrowed or base, and a period of time. For example, a $1000 loan with 10% simple interest would charge $100 of interest in a given year. There is no compounding of simple interest.
Simple interest is typically calculated during and within payment periods on most loans and bonds because of its ease of use. But compounding of interest is customarily used for interest covering multiple payment periods. Mortgage loans and most credit cards charge simple interest within a payment period calculated typically monthly (sometimes quarterly) but charge compound interest annually and across payment periods. Bonds typically pay simple interest quarterly or semi-annually but compound interest annually.
Some courts still use and assign simple interest for prejudgment and post-judgment interest or at least have longer periods of simple interest (like annually).
Well for calculating simple interest we have got a formula as follows,
SI = P× N× R/100
Where
SI = Simple interest
P= Principal amount ( The amount which one invest or borrows)
N= number of years
R= rate of interest
One thing you have to careful about that N has to be in years, so if interest period is 6 months then it need to be converted into years I.e 0.5 years.
If you want to find the amount(A) which you will get after N years , then you can use this formula directly.
Answers & Comments
Verified answer
Explanation:
Simple interest is interest calculated based on a percentage interest rate, a nominal amount borrowed or base, and a period of time. For example, a $1000 loan with 10% simple interest would charge $100 of interest in a given year. There is no compounding of simple interest.
Simple interest is typically calculated during and within payment periods on most loans and bonds because of its ease of use. But compounding of interest is customarily used for interest covering multiple payment periods. Mortgage loans and most credit cards charge simple interest within a payment period calculated typically monthly (sometimes quarterly) but charge compound interest annually and across payment periods. Bonds typically pay simple interest quarterly or semi-annually but compound interest annually.
Some courts still use and assign simple interest for prejudgment and post-judgment interest or at least have longer periods of simple interest (like annually).
Well for calculating simple interest we have got a formula as follows,
SI = P× N× R/100
Where
SI = Simple interest
P= Principal amount ( The amount which one invest or borrows)
N= number of years
R= rate of interest
One thing you have to careful about that N has to be in years, so if interest period is 6 months then it need to be converted into years I.e 0.5 years.
If you want to find the amount(A) which you will get after N years , then you can use this formula directly.
A = P(1+N×R)
[tex]\huge\mathfrak{✩Solution}[/tex]
• Simple interest is based on the principal amount of a loan or the first deposit in a savings account.