Simple Interest Calculator, Calculate SI over days, months, years

So for a CD of $50,000 at a rate of 4.5% over 2 years, the calculation results in a simple interest amount of $4,500. You can read about and experiment with compound interest calculations at the CalculatorSoup® Compound Interest Calculator page. To calculate the combined simple interest plus principal amount visit the CalculatorSoup® Simple Interest Plus Principal Calculator.

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Loans like car loans and mortgages use the simple interest calculation to find interest owed. Student loans also typically charge simple interest and not compound interest. Like auto law firms and client trust accounts and home loans, total student loan interest charges are calculated at the beginning of the loan, and the interest owed is spread out over the course of paying back the loan.

• The concept of interest rate is also widely applied to various business calculations.
• Under this formula, you can calculate simple interest taken over different frequencies, like daily or monthly.
• This demonstrates how the combination of compounding and regular contributions work together to build long-term wealth.
• For instance, if you wanted to calculate monthly interest taken on a monthly basis, then you would input the monthly interest rate as “r” and multiply by the “n” number of periods.

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This value tells you what is the interest rate on a yearly basis and thus helps you make the best (i.e., the most reasonable) financial decision. If you are not sure how to do this, read the APY calculator description, where everything is explained in detail. Over the long run, compound interest can cost you more as a borrower (or earn you more as an investor). You can check with your bank on the compounding frequency of your accounts.

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For instance, if you wanted to calculate interest over six months, your “t” value would equal 0.5. MMFs are a safer option for conservative investors who want to earn interest on their cash holdings with relatively low risk. Though the returns might not be as high as stocks or ETFs, the steady accrual of interest makes MMFs an attractive choice for compounding.

Simple Interest Calculator & Formula

The Principal is the amount borrowed, the original amount invested, or the face value of a bond [2]. On this page, I explain the simple interest formula and provide a simple interest calculator that you can use to solve some basic problems. You can use our simple interest calculator to calculate the simple interest, without compounding, on your savings or loan. That is to say that interest is only calculated on the principal, not onpreviously accumulated interest. If you want to work out compound interest, use our compound interest calculator instead. For each month in the loan term, the simple interest calculation is repeated on the remaining loan balance.

The interest is customarily expressed as a percentage (%) of the original amount (principal amount, balance). Simple interest works in your favor as a borrower, since you’re only paying interest on the original balance. That contrasts with compound interest, where you also pay interest on any accumulated interest.

Calculate the interest earned and the future value of an investment using simple interest by entering the principal, rate, and time below. A simple interest calculation takes a sum of money (principal) and calculates regular interest only on that original amount, without the effect of compounding. The annual or yearly interest rate is 4.5%, and the investment period 24 months. Students of the economy become familiar with this term during their very first lectures. Financial advisors, financial officers, stockbrokers, bankers, investment managers, and other financial experts use this term hundreds of times during their everyday activities.

The Simple Interest Calculator calculates the interest and end balance based on the simple interest formula. Click the tabs to calculate the different parameters of the simple interest formula. In real life, most interest calculations involve compound Interest. Robo-advisors, such as StashAway, take the guesswork out of investing by offering intelligent, globally diversified portfolios that are managed for optimal performance. By keeping your risk level constant while targeting long-term growth, robo-advisors help you leverage compound interest without needing active management. So for a total accrued amount of $26,800 with an original principal of $22,000 and a term of 4 years, the simple interest rate is 5.45%.

However, in the past, they were issued by many financial institutions (insurers and banks) and even the governments. For example, the so-called consols were issued by the British government and were finally redeemed in 2015. To explain what is perpetuity, we have to start with the term annuity. In the most intuitive sense, an annuity is a series of payments that are made during a specified period at equal intervals.

By the end of this guide, you will know how to calculate simple interest, understand its significance, and recognize its practical applications. You can use the simple interest calculator below to figure out how much interest you could earn with different rates and time periods. Keep in mind that although the simple interest calculation is valid, once you start making payments on a loan, the loan balance decreases.