Simple interest calculation

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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