Simple Interest Calculator
Understanding Simple Interest
Simple interest is a straightforward method of calculating the interest charged on a loan or earned on an investment. It's based on the original principal amount only, and does not take into account any accumulated interest from previous periods. This means the interest earned or paid remains constant over the entire loan or investment term.
How Simple Interest Works
The formula for calculating simple interest is:
Simple Interest (SI) = (P × R × T) / 100
Where:
- P = Principal Amount (the initial amount of money borrowed or invested)
- R = Annual Interest Rate (the percentage of interest charged per year)
- T = Time Period (the duration for which the money is borrowed or invested, in years)
Total Amount
To find the total amount payable or receivable at the end of the term, you add the calculated simple interest to the principal amount:
Total Amount = Principal Amount + Simple Interest
When is Simple Interest Used?
Simple interest is commonly used for short-term loans, such as personal loans, car loans, and sometimes for short-term business loans. It's also applied to savings accounts and certificates of deposit (CDs) in some cases, although compound interest is more prevalent for longer-term savings and investments.
Example Calculation
Let's say you borrow $5,000 (Principal) at an annual interest rate of 6% (Rate) for 4 years (Time).
- Principal (P) = $5,000
- Annual Interest Rate (R) = 6%
- Time (T) = 4 years
Using the simple interest formula:
SI = (5000 × 6 × 4) / 100 = $1,200
The simple interest accrued over 4 years is $1,200.
The total amount you would need to repay would be:
Total Amount = $5,000 + $1,200 = $6,200
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function calculateSimpleInterest() {
var principalInput = document.getElementById("principal");
var rateInput = document.getElementById("rate");
var timeInput = document.getElementById("time");
var resultDiv = document.getElementById("result");
var principal = parseFloat(principalInput.value);
var rate = parseFloat(rateInput.value);
var time = parseFloat(timeInput.value);
if (isNaN(principal) || isNaN(rate) || isNaN(time) || principal <= 0 || rate < 0 || time <= 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var simpleInterest = (principal * rate * time) / 100;
var totalAmount = principal + simpleInterest;
resultDiv.innerHTML = "
Calculation Results
" +
"
Principal Amount: $" + principal.toFixed(2) + "" +
"
Annual Interest Rate: " + rate.toFixed(2) + "%" +
"
Time Period: " + time.toFixed(2) + " years" +
"
Simple Interest Earned/Owed: $" + simpleInterest.toFixed(2) + "" +
"
Total Amount (Principal + Interest): $" + totalAmount.toFixed(2) + "";
}