The simple interest amount is equal to the principal amount times the annual interest rate divided by the number of periods per year m times the number of periods n. To calculate interest multiply the principal by the interest rate and the term of the loan. This formula can be expressed algebraically as.
Suppose you give 100 to a bank which pays you 5 simple interest at the end of every year.
To calculate simple interest start by multiplying the principal which is the initial sum borrowed by the loans interest rate written as a decimal. To calculate simple interest on your loan each month divide your annual interest rate by 12 to find the monthly interest rate. To calculate interest multiply the principal by the interest rate and the term of the loan. When the amount of interest the principal and the time period are known you can use the derived formula from the simple interest formula to determine the rate as follows.