Simple Interest Calculation in Deposits. Simple interest is calculated only on the original sum of money which is known as the principal. Your intermediate accounting textbook may substitute n for time the n stands for number of periods time.
Principal x rate x time interest For example say you invest 100 the principal at a 5 annual rate for one year.
If you invest Rs50000 in a fixed deposit account for a period of 1 year at an interest rate of 8 then the simple interest earned will be. 600 30 pounds630 After one year Sally will have pounds630. To use the simple interest formula we substitute in the values for variables that are given and then solve for the unknown variable. Suppose you give 100 to a bank which pays you 5 simple interest at the end of every year.