# What is the formula for simple interest?

Simple Interest, i, is a percentage of a principal amount p, calculated for a speciﬁed period, t, for a given annual rate of interest, r.

It is calculated as:

# i = prt

Simple Interest, i, for a principal amount of $1000, calculated for a speciﬁed period, 1 year, for a given annual rate of interest, 5% is,$50.

Final amount A, is addition of initial principal, p, and simple interest, prt. A = p + prt

Final amount A for a principal amount p of $1000, calculated for a speciﬁed period, 1 year, for a given annual rate of interest, 5% is$1050.

Simple interest is calculated once. If interest is calculated several times , we are dealing with the compound interest.