27.99 Interest Rate Calculator

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Simple Interest Calculator

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Total Interest Earned: —

Total Amount (Principal + Interest): —

function calculateSimpleInterest() { var principal = parseFloat(document.getElementById("principal").value); var rate = parseFloat(document.getElementById("rate").value); var time = parseFloat(document.getElementById("time").value); var totalInterest = document.getElementById("totalInterest"); var totalAmount = document.getElementById("totalAmount"); if (isNaN(principal) || isNaN(rate) || isNaN(time) || principal < 0 || rate < 0 || time < 0) { totalInterest.textContent = "Invalid input"; totalAmount.textContent = "Invalid input"; return; } // Simple Interest Formula: SI = (P * R * T) / 100 var interest = (principal * rate * time) / 100; var amount = principal + interest; totalInterest.textContent = "$" + interest.toFixed(2); totalAmount.textContent = "$" + amount.toFixed(2); }

Understanding Simple Interest

Simple interest is a straightforward method of calculating the interest charge on a loan or earned on an investment. It's based solely on the original amount of money deposited or borrowed, known as the principal. Unlike compound interest, which calculates interest on both the principal and the accumulated interest from previous periods, simple interest only considers the principal. This makes it a simpler calculation but potentially less advantageous for long-term savings or more costly for long-term loans compared to compound interest.

How Simple Interest Works

The formula for calculating simple interest is:

Simple Interest (SI) = (Principal × Rate × Time) / 100

Where:

  • Principal (P): This is the initial amount of money that is borrowed or invested.
  • Rate (R): This is the annual interest rate, expressed as a percentage.
  • Time (T): This is the duration for which the money is borrowed or invested, usually expressed in years.

The total amount repayable or receivable at the end of the term is the sum of the principal and the calculated simple interest:

Total Amount = Principal + Simple Interest

When Is Simple Interest Used?

Simple interest is commonly used for:

  • Short-term loans
  • Calculating interest on savings accounts for shorter periods
  • Certain types of bonds
  • Calculating the cost of borrowing for personal loans with fixed rates over a few years.

Example Calculation

Let's say you deposit $5,000 into a savings account that offers a simple annual interest rate of 4% for 5 years.

  • Principal (P) = $5,000
  • Rate (R) = 4%
  • Time (T) = 5 years

Using the simple interest formula:

SI = ($5,000 × 4 × 5) / 100 = $1,000

The total interest earned after 5 years would be $1,000.

The total amount in your account at the end of 5 years would be:

Total Amount = $5,000 + $1,000 = $6,000

This calculator helps you quickly determine the simple interest earned or owed based on the principal amount, annual interest rate, and the time period.

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