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SIMPLE INTEREST - FORMULA



The formula for calculating simple interest is:
Simple Interest = Principal x Interest Rate x Term of the loan
 
= P x i x n

Example
Simple interest is charged at 5% on a RS 10,000 loan that is taken out for a three-year period, the total amount of interest payable by the borrower is calculated as: 

10,000 x 0.05 x 3 =  1,500.

Answer is : RS 1,500

Interest on this loan is payable at RS 500 annually, or RS 1,500 over the three-year loan term.
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