Calculate the simple interest accrued on an investment or loan.
Accrued Interest
This is the total interest earned or owed over the specified period.
Understanding Simple Interest Accrual
The Interest Accrued Calculator helps you determine the total amount of simple interest that will accumulate on a principal sum over a specific period, given a fixed annual interest rate. Simple interest is a straightforward method of calculating the interest charge on a loan or the interest earned on an investment. It's calculated only on the initial principal amount, meaning the interest earned in previous periods does not earn further interest.
The Formula for Simple Interest
The calculation is based on the following formula:
I = P × r × t
Where:
I represents the Interest Accrued (the amount of money you will earn or owe).
P is the Principal Amount (the initial sum of money borrowed or invested).
r is the Annual Interest Rate (expressed as a decimal). To convert a percentage rate to a decimal, divide by 100 (e.g., 5% becomes 0.05).
t is the Time Period (the duration of the loan or investment, in years).
How to Use the Calculator
To use this calculator, simply input the following values:
Principal Amount: Enter the initial amount of money.
Annual Interest Rate: Enter the yearly interest rate as a percentage (e.g., 5 for 5%).
Time Period: Enter the duration in years for which the interest will accrue.
Click the "Calculate Interest Accrued" button, and the calculator will display the total simple interest.
When is Simple Interest Used?
Simple interest is commonly used in several financial scenarios:
Short-term Loans: Many personal loans or short-term business loans might use simple interest.
Savings Accounts: Some basic savings accounts might calculate interest simply.
Bonds: Certain types of bonds, like Treasury Bills, often pay simple interest.
Understanding Basic Financial Concepts: It serves as a fundamental building block for understanding more complex interest calculations like compound interest.
While compound interest (where interest is earned on both the principal and previously accrued interest) often leads to faster growth over longer periods, simple interest provides a clear, predictable return or cost for shorter terms.
Example Calculation
Let's say you invest $5,000 (P) at an annual interest rate of 4% (r = 0.04) for a period of 5 years (t).
Using the formula:
I = $5,000 × 0.04 × 5
I = $200 × 5
I = $1,000
So, the accrued interest over 5 years would be $1,000. The total amount at the end of the period would be $5,000 (principal) + $1,000 (interest) = $6,000.
function calculateInterest() {
var principal = parseFloat(document.getElementById("principal").value);
var annualRate = parseFloat(document.getElementById("annualRate").value);
var timePeriod = parseFloat(document.getElementById("timePeriod").value);
var resultDiv = document.getElementById("result");
var resultValue = document.getElementById("result-value");
if (isNaN(principal) || isNaN(annualRate) || isNaN(timePeriod) || principal < 0 || annualRate < 0 || timePeriod < 0) {
resultValue.innerHTML = "Please enter valid positive numbers.";
resultDiv.style.display = "block";
resultDiv.style.borderColor = "#dc3545"; // Red for error
return;
}
// Convert annual rate from percentage to decimal
var rateDecimal = annualRate / 100;
// Calculate simple interest
var interestAccrued = principal * rateDecimal * timePeriod;
// Display the result
resultValue.innerHTML = "$" + interestAccrued.toFixed(2);
resultDiv.style.display = "block";
resultDiv.style.borderColor = "#28a745"; // Green for success
}