# Simple Interest Calculator

[loan] * [rate] * [year]
$Simple Interest = $$S.I = P \times\R \times T$$$

## Simple Interest Calculator

A Simple Interest Calculator is a tool that helps you quickly calculate the simple interest earned on an investment or the interest due on a loan over a specified period. This calculator automates the computation using the simple interest formula and provides the result without manual calculations.

### Definition of Simple Interest

Simple Interest is a method of calculating the interest charge on a loan or the interest earned on an investment. The interest is computed only on the principal amount, or on that portion of the principal amount that remains unpaid.

#### Formula for Simple Interest

The formula to calculate simple interest is:

$\text{Simple Interest} (SI) = P \times R \times T$

Where:

– $$P$$ is the Principal amount (the initial sum of money)
– $$R$$ is the Rate of Interest per period (expressed as a decimal or percentage)
– $$T$$ is the Time the money is invested or borrowed for (in years)

#### Example

Let’s consider an example to calculate the simple interest.

Example Problem:

Suppose you invest \$1,000 in a savings account that pays an annual interest rate of 5% for 3 years. What is the simple interest earned? Given: – Principal (P) = \$1,000
– Rate of Interest (R) = 5% = 0.05
– Time (T) = 3 years

#### Using the formula:

$\text{SI} = P \times R \times T$
$\text{SI} = 1000 \times 0.05 \times 3$

Calculation:

$\text{SI} = 1000 \times 0.05 = 50$
$\text{SI} = 50 \times 3 = 150$

Simple Interest Earned:

The simple interest earned over 3 years is \$150. #### Real-Life Application Simple interest is commonly used in various real-life financial situations, including loans, savings accounts, and investments. Here’s how simple interest works in these contexts: ### 1. Loans When you borrow money, simple interest is often used to determine the interest you’ll pay on the principal amount. Example: Personal Loan • Principal (P):$5,000
• Annual Interest Rate (R): 10%
• Loan Term (T): 3 years

Using the simple interest formula:
$SI = P \times R \times T$
$SI = 5000 \times 0.10 \times 3$
$SI = 500 \times 3$
$SI = 1500$

You would pay $1,500 in interest over the 3-year loan term. ### 2. Savings Accounts Banks often use simple interest to calculate the interest earned on savings accounts. Example: Savings Account • Principal (P):$2,000
• Annual Interest Rate (R): 2%
• Time (T): 5 years

$SI = P \times R \times T$
$SI = 2000 \times 0.02 \times 5$
$SI = 40 \times 5$
$SI = 200$

You would earn $200 in interest over 5 years. ### 3. Investments Simple interest can also be applied to short-term investments where interest is calculated on the original principal. Example: Short-term Bond • Principal (P):$10,000
• Annual Interest Rate (R): 3%
• Investment Period (T): 2 years

Using the simple interest formula:

$SI = P \times R \times T$
$SI = 10000 \times 0.03 \times 2$
$SI = 300 \times 2$
$SI = 600$

You would earn \$600 in interest over the 2-year period.