Simple Interest Calculator
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Understanding Simple Interest
Simple interest is a quick and straightforward method of calculating the interest charge on a loan or investment. It is based on the original principal amount and does not take into account any accumulated interest from previous periods.
The formula for calculating simple interest is: I = P × R × T, where:
- I is the interest amount
- P is the principal amount (initial investment or loan amount)
- R is the annual interest rate (in decimal form)
- T is the time period in years
Simple interest is commonly used for short-term loans, car loans, and some types of investments. It's easier to calculate than compound interest, which adds interest to the principal for each period.
Frequently Asked Questions
What is simple interest?
How is simple interest different from compound interest?
When is simple interest commonly used?
How do I convert months or days to years for the calculation?