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Simple Interest Calculator

Use this calculator to determine the simple interest earned on an investment or the simple interest paid on a loan.

Results

Enter the values above and click "Calculate".

function calculateSimpleInterest() { var principal = parseFloat(document.getElementById("principal").value); var rate = parseFloat(document.getElementById("rate").value); var time = parseFloat(document.getElementById("time").value); var resultDiv = document.getElementById("result"); if (isNaN(principal) || isNaN(rate) || isNaN(time) || principal <= 0 || rate <= 0 || time <= 0) { resultDiv.innerHTML = "Please enter valid positive numbers for all fields."; return; } // Simple Interest Formula: SI = (P * R * T) / 100 var interest = (principal * rate * time) / 100; var totalAmount = principal + interest; resultDiv.innerHTML = "Principal Amount: $" + principal.toFixed(2) + "" + "Annual Interest Rate: " + rate.toFixed(2) + "%" + "Time Period: " + time.toFixed(2) + " years" + "Simple Interest Earned/Paid: $" + interest.toFixed(2) + "" + "Total Amount (Principal + Interest): $" + totalAmount.toFixed(2) + ""; }

Understanding Simple Interest

Simple interest is a straightforward method of calculating the interest charge on a loan or the interest earned on an investment. It is calculated based on the initial principal amount only, and does not account for compounding interest (where interest earned in one period is added to the principal for subsequent calculations).

How Simple Interest Works

The core principle of simple interest is that the interest earned or paid remains constant over the life of the loan or investment. This is because the interest is always calculated on the original principal amount.

The Simple Interest Formula

The formula for calculating simple interest is:

SI = (P × R × T) / 100

  • SI stands for Simple Interest
  • P stands for the Principal amount (the initial sum of money)
  • R stands for the Annual Interest Rate (expressed as a percentage)
  • T stands for the Time period (in years)

To find the total amount (principal plus interest), you simply add the calculated simple interest to the original principal:

Total Amount = P + SI

When is Simple Interest Used?

While compound interest is more common in savings accounts and long-term investments, simple interest is often used in:

  • Short-term loans
  • Personal loans
  • Calculating interest on bonds
  • Some types of car loans

Example Calculation

Let's say you invest $5,000 (Principal) at an annual interest rate of 4% (Rate) for 5 years (Time).

  • P = $5,000
  • R = 4%
  • T = 5 years

Using the simple interest formula:

SI = (5000 × 4 × 5) / 100

SI = 100,000 / 100

SI = $1,000

The simple interest earned over 5 years would be $1,000.

The total amount you would have after 5 years is:

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

Our calculator above can help you quickly compute these values for any principal amount, interest rate, and time period.

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