Simple interest is a type of interest that is calculated as a fixed percentage of the principal amount borrowed or invested. The formula for calculating simple interest is:
Simple Interest = (P x R x T) / 100
Where:
P = principal amount (the amount of money borrowed or invested)
R = interest rate per annum (expressed as a percentage)
T = time period (in years)
Simple Interest Calculator
Using this formula, you can calculate any of the following variables given the other two:
- P = (100 x SI) / (R x T)
- R = (100 x SI) / (P x T)
- T = (100 x SI) / (P x R)
Here are some examples of how to use the simple interest formula:
Example 1:
Ex.1) Suppose you borrow ₹5,000 at a simple interest rate of 7% per annum for 3 years. What is the total amount of interest you will pay?
Solution
Simple Interest = (P x R x T) / 100
Simple Interest = (5,000 x 7 x 3) / 100
Simple Interest = ₹ 1,050
Therefore, the total amount of interest you will pay is ₹1,050.
Example 2:
Ex.2) Suppose you want to invest ₹10,000 at a simple interest rate of 5% per annum for 2 years. What will be the total amount you will receive at the end of the investment period?
Solution
Simple Interest = (P x R x T) / 100
Simple Interest = (10,000 x 5 x 2) / 100
Simple Interest = ₹1,000
Therefore, the total amount you will receive at the end of the investment period is ₹11,000.
Example 3:
Ex.3) Suppose you want to borrow ₹3,000 at a simple interest rate of 9% per annum for 4 years. What will be the monthly payment you need to make to repay the loan?
Solution
Simple Interest = (P x R x T) / 100
Simple Interest = (3,000 x 9 x 4) / 100
Simple Interest = ₹1,080
Total amount to be repaid = P + SI
Total amount to be repaid = 3,000 + 1,080
Total amount to be repaid = ₹ 4,080
Monthly payment = Total amount to be repaid / (T x 12)
Monthly payment = 4,080 / (4 x 12)
Monthly payment = 85 ₹
