Calculate interest earned or owed using the P × r × t formula.
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Simple Interest
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Simple Interest
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Total Amount
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Interest Per Year
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Interest Per Month
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Simple vs Compound Interest
Simple Interest: I = P x r x t
Total Amount: A = P(1 + rt)
P = Principal | r = annual rate (decimal) | t = time in years
Simple interest only calculates on the original principal — never on accumulated interest. Used in: short-term loans, some car loans, US Treasury Bills, and savings bonds.
Simple Interest
$10,000 at 5% for 3 years: Interest = $1,500. Grows linearly at $500/year.
Compound Interest
$10,000 at 5% for 3 years: Interest = $1,576. Accelerates as interest earns interest.
Frequently Asked Questions
Simple interest is used for: short-term personal loans, some auto loans, US Treasury Bills, bridge loans. Most savings accounts and long-term investments use compound interest because it grows faster for the investor.
A flat rate applied to the original balance always produces less interest than the same rate compounded monthly. A 6% flat rate on a loan is equivalent to roughly 11% APR in a traditional amortizing loan.
⚠️ Simple interest assumes no compounding. Most financial products use compound interest.
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