Simple Interest Formulas, Savings
When interest is based on the principal amount only, with not
any accrued interest added, it is considered simple interest.
This amounts to less earnings to the account holder than by
The simple interest earned
Deposit x R x D
Where R is the rate of simple interest and
D is the duration. So $1,500 in an account at a 3% rate will
earn $90.00 over the course of a two years. Giving a total
of $1,590 in the account :
.03 x 2
Note that the interest in this example is arrived at over
the total duration (does not reset after the first year, but
rather is always computed on the principal deposit). In reality
amount(s) will vary by savings institution based on when the
interest is being paid on the account.
When figuring interest by this and other formulas, make sure
to clarify that the rate being offered or advertised is in fact
rate. Otherwise, if the account is based on a variable rate,
for the purposes of comparing earnings,
outcome will differ and reach an unknown sum.
To find your interest rate
[Principal Amount & Interest/Principal Deposit] -1 ) / D
Suppose interest and principal amounts to $3,720 after 5 years,
and you deposited $3,100:
-1) / 5 = .04, or 4% interest was paid
Setting this side by side with compound interest formulas will
quickly reveal how much more will be earned on savings over
simple interest. A
simple concept, yet so important to increasing earnings potential.
Quickly calculate rates with our simple interest rates calculator.