SIMPLE INTEREST
You earn interest only on the original amount (principal). The interest amount remains the same every period.
FORMULA
SI Simple Interest
P = Principal (initial amount) R = Rate of Interest per year (%)
So, the interest you earn each year is fixed.
Suppose you invest $10,000 at an interest rate of 10% per year for 3 years.
EXAMPLE
• Interest each year = $10,000 × 10 x
Total Interest in 3 years = $1,000 × 3 = $3,000
•Total Amount after 3 years = Principal + Total Interest
$ You will get $3,000 as interest and $13,000 in total after 3 years.
KEY POINTS
Interest amount remains the same every year.
Used in loans such as personal loans or short-term loans.
Grows at a steady and predictable rate.