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how to calculate simple interest method. However banks financial institutions and professional lenders in India do not use simple interest. Suppose P be the principal amount R be the rate of interest per annum and n be the time in months then the formula can be written as.
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Now let us see the formula to calculate the interest for months. However there is the element of time which also plays a significant part in interest problems. R and t are in the same units of time.
Thus the basis of equation is modified to.
N number of periods. Youll often find the formula written using an annual interest rate where the number of periods is specified in years or a fraction of a year. To calculate simple interest use this formula. A simple interest loan is one in which the interest has been calculated by multiplying the principal P times the rate r times the number of time periods t.
