How Does a Simple Interest Calculator Work?
Simple interest is calculated solely on the original principal amount of a loan or investment. Unlike compound interest, simple interest does not generate interest on previously accumulated interest.
The Simple Interest Formula
The underlying mathematics used to determine the total interest is straight-forward:
$I = P \times r \times t$
- I = Total interest amount
- P = Principal amount (initial investment or loan)
- r = Annual interest rate (in decimal form)
- t = Time period (in years)
To find the total future amount, simply add the accumulated interest to the original principal: $A = P + I$.