## 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*

*Interest amount = $600 x (0.14 / 1) x 3 = $252**Total amount = $600 + $252 = $852*

**Example #2**

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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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