How to Calculate Simple Interest
Simple interest is the most basic way to calculate interest on a principal amount. Unlike compound interest, it's calculated only on the original principal.
Simple Interest Formula
SI = P × R × T / 100
Where:
- SI = Simple Interest earned
- P = Principal (initial amount)
- R = Annual interest rate (%)
- T = Time period in years
Step-by-Step:
- 1
Identify values
Determine P (principal), R (rate), and T (time in years).
- 2
Multiply
Multiply P × R × T.
- 3
Divide by 100
Divide the result by 100 to get the interest amount.
Worked Examples:
FD Interest
P: ₹50,000R: 7%T: 3 years
Result: ₹10,500
SI = 50000 × 7 × 3 / 100 = ₹10,500