# How to use the simple interest formula

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Simple interest is a type of interest that is calculated as a fixed percentage of the principal amount borrowed or invested. The formula for calculating simple interest is:

Simple Interest = (P x R x T) / 100

Where:

P = principal amount (the amount of money borrowed or invested)

R = interest rate per annum (expressed as a percentage)

T = time period (in years)

Simple Interest Calculator

# Simple Interest Calculator

Using this formula, you can calculate any of the following variables given the other two:

• P = (100 x SI) / (R x T)
• R = (100 x SI) / (P x T)
• T = (100 x SI) / (P x R)

Here are some examples of how to use the simple interest formula:

Example 1:

Ex.1) Suppose you borrow ₹5,000 at a simple interest rate of 7% per annum for 3 years. What is the total amount of interest you will pay?

Solution

Simple Interest = (P x R x T) / 100

Simple Interest = (5,000 x 7 x 3) / 100

Simple Interest =  ₹ 1,050

Therefore, the total amount of interest you will pay is  ₹1,050.

Example 2:

Ex.2) Suppose you want to invest ₹10,000 at a simple interest rate of 5% per annum for 2 years. What will be the total amount you will receive at the end of the investment period?

Solution

Simple Interest = (P x R x T) / 100

Simple Interest = (10,000 x 5 x 2) / 100

Simple Interest = ₹1,000

Therefore, the total amount you will receive at the end of the investment period is ₹11,000.

Example 3:

Ex.3) Suppose you want to borrow ₹3,000 at a simple interest rate of 9% per annum for 4 years. What will be the monthly payment you need to make to repay the loan?

Solution

Simple Interest = (P x R x T) / 100

Simple Interest = (3,000 x 9 x 4) / 100

Simple Interest = ₹1,080

Total amount to be repaid = P + SI

Total amount to be repaid = 3,000 + 1,080

Total amount to be repaid = ₹ 4,080

Monthly payment = Total amount to be repaid / (T x 12)

Monthly payment = 4,080 / (4 x 12)

Monthly payment = 85 ₹

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