Simplest way to calculate Simple Interest
Simple interest is a straightforward method of calculating interest on a loan or investment. It is based solely on the initial principal amount and does not consider any accrued interest over time. With simple interest, the interest is calculated only on the original principal and remains constant throughout the term of the loan or investment.
Simple Interest: (If time period in years)
Simple Interest = (Principal Amount × Interest × Time Period) / 100
Total Amount = Principal Amount + Simple Interest
Simple Interest: (If time period in months)
Simple Interest = (Principal Amount × Interest × (Time Period / 12)) / 100
Total Amount = Principal Amount + Simple Interest
Suppose you lend a friend ₹ 1,00,000 for a period of 5 years at an annual interest rate of 8%. To calculate the simple interest accrued, we can use the formula:
To calculate the Simple Interest:
| Principal Amount | = 1,00,000 |
| Interest | = 8 % |
| Time Period | = 5 Years |
| Simple Interest | = (Principal Amount × Interest × Time Period) / 100 |
| = (100000 × 8 × 5) / 100 | |
| = (800000 × 5) / 100 | |
| = (4000000) / 100 | |
| = 40,000 |
| Total Amount | = Principal Amount + Simple Interest |
| = 100000 + 40000 | |
| = 1,40,000 |
Therefore, the Simple Interest accrued over the 5-year period would be ₹ 1,40,000.
If the time period is given in months instead of years, you can modify the formula for calculating simple interest accordingly.
| Principal Amount | = 1,00,000 |
| Interest | = 8 % |
| Time Period | = 18 months |
| Simple Interest | = (Principal Amount × Interest × (Time Period / 12)) / 100 |
| = (100000 × 8 × (18 / 12)) / 100 | |
| = (100000 × 8 × 1.5) / 100 | |
| = (800000 × 1.5) / 100 | |
| = (1200000) / 100 | |
| = 12,000 |
| Total Amount | = Principal Amount + Simple Interest |
| = 100000 + 12000 | |
| = 1,12,000 |
Therefore, the Simple Interest accrued over the 18 months would be ₹ 1,12,000.
