How do you use a simple interest calculator?


Quick Answer

A simple interest calculator figures out the amount of interest that is earned and added to an initial investment amount. To calculate the interest amount, a person must provide the interest amount, interest rate and period of investment. The calculator does the math and displays the total amount of interest.

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Full Answer

Simple interest is calculated by multiplying the initial investment amount, called the principal, by the interest rate by the amount of time the money is invested, expressed in years. This amount is then divided by 100 to get the amount of interest earned.

A simple interest calculator performs the operation, [Simple interest = (P x R x T) /100], automatically. Some calculators also calculate the other factors of the equation. If a person provides the principal amount, the interest rate and the amount of interest desired a calculator can determine the length of time required to achieve the desired amount of interest. Similarly, the principal investment amount is calculated by inputting the interest rate, period of investment and desired amount of interest.

Compound interest can also be calculated automatically. Compound interest calculations add the amount of interest earned during each time period to the principal investment. Compound interest calculations are more complex than simple interest calculations because the investment total grows with each period.

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