Simple Interest
Simple Interest
Simple interest accrues only on the original principal, growing the sum linearly with time.
The interest is I = P·r·t. where P is the principal, r the annual rate and t the time in years.
Inputs
P := 5000=5000
r := 0.04=0.04
t := 3=3
Apply the simple-interest formula.
I := P·r·t=600
Results
Unlike compound interest, simple interest does not earn interest on interest, so it grows more slowly over long periods.
Assumptions & limitations
- Constant rate.
- No compounding.
- Principal unchanged.