Simple interest calculation formula
Interest amount = Initial amount × (Annual interest rate(%) / M) × t
M – number of periods per year
t – number of periods
The interest amount is equal to the initial amount, multiplied by the annual interest rate (%), divided by the number of periods per year M, times the number of periods t.
Example #1
Initial amount = $600
Annual interest rate = 14% (or 0.14)
Period – 3 years
So,
Number of periods per year = 1
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Interest amount = $600 x (0.14 / 1) x 3 = $252
Total amount = $600 + $252 = $852
Example #2
Initial amount = $600
Annual interest rate = 14% (or 0.14)
Period – 15 months
So,
Number of periods per year = 12 month/year
Interest amount = $600 x (0.14 / 12) x 15 = $105
Total amount = $600 + $105 = $705
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