# Simple Interest

Simple interest is a method of calculating the amount of interest at a given rate and for a given period of time. In simple interest, the principal amount is always the same, unlike compound interest, where we add the previous years’ principal interest to calculate the next year’s interest.

#### What is Simple Interest?

Simple interest is a quick and easy method of calculating interest on money, in the simple interest method interest is always applied to the principal amount, with the same interest rate for each time cycle. When we invest our money in any bank, the bank gives us interest on our money. There are many types of interest charged by banks, one of which is simple interest. Now, before going deeper into the concept of simple interest, let us first understand what debt is.

A loan is an amount that a person borrows from a bank or financial authority to meet their needs. Examples of loans include home loans, car loans, education loans, and personal loans. A loan amount is required by a person to repay the authorities on time, which is usually the interest you pay on the loan.

#### Simple Interest formula

Simple interest is calculating by using below formula.

S.I. = P × R × T

where P = Principal, R = Rate of Interest in % per annum, and T = Time, usually calculated as the number of years. The rate of interest is in percentage r% and is to be written as r/100.

#### Examples:

Maria deposited in a bank 6400 and earned 8000 after a year. Calculate the simple interest she earned?

Explanation:

The principal (P) = 6400,Amount(A)= 8000

Apply the formula;
Simple Interest (SI) = Amount (A) – Principal (P)
= 8000- 6400

= \$1600

Therefore, Maria earned an interest of \$ 1600

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