How to Calculate Simple Interest

The simple interest formula is abbreviated in this form:
I = Prt
A = P (1 + rt)
where: I =simple interest, P = principal, A = Accumulated amount, r = rate of interest, t = time in years

Learn how to calculate simple interest with the following examples:

Question 1:
Find the simple interest over 10 years, if a customer borrow $25,000 at a rate of 7.5% per annum.
Solution:
I = Prt = 25,000 * 0.075 * 10 = $18,750

Question 2:
A businessman borrowed $100,000 for 8 years at a rate of 5% per annum. Calculate the simple interest and the amount owing at the end of the period.
Solution:
I = Prt = 100,000 * 0.05 * 8 = $40,000
A = P (1 + rt) = 100,000 (1 + 0.05 * 8) = 100,000 (1.4) = $140,000
Thus, the total amount owing at end of period is $140,000

* Next: How to Calculate Debenture Interest

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