Simple interest: Calculating Interest That Does Not Compound
Simple interest grows in proportion to principal, rate and time. It can explain a contract that charges on the original amount without adding interest to the interest-bearing balance.
Use the Simple interest Calculator to enter your own figures and compare the result with the worked example below.
Simple interest formula
Interest = P × r × t
Worked example
| Item | Example value |
|---|---|
| Principal | 1000 USD |
| Annual simple interest rate | 5 % |
| Time | 2 years |
| Simple interest | 100 USD |
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Match time to the annual rate and inspect the contract's day-count convention. Simple interest and compound interest are different models.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see Investor.gov: Introduction to investing. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
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