Interest and amount: principal, monthly rate and months
- Input
- 1000 | 2% | 6
- Expected output
- 120 | 1120
I = 1,000 × 0.02 × 6 = 120. A = 1,000 + 120 = 1,120.
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simple interest formula with examples
Simple interest is interest that applies only to the original principal, period after period, without earning interest on itself. It is the regime most often tested in financial math and the easiest to check by hand. The calculator below solves for any unknown and shows the formula with the numbers in place.
I = 1,000 × 0.02 × 6 = 120. A = 1,000 + 120 = 1,120.
12% a year = 1% a month (proportional). I = 5,000 × 0.01 × 8 = 400. A = 5,400.
P = 360 ÷ (0.03 × 4) = 360 ÷ 0.12 = 3,000.
I = 2,450 − 2,000 = 450. r = 450 ÷ (2,000 × 9) = 0.025 = 2.5% a month.
I = P × r × t, where P is the principal, r the rate per period (as a decimal, 2% = 0.02) and t the number of periods, always in the same unit as the rate. The amount is A = P + I = P × (1 + r × t). Example: 1,000 at 2% per month for 6 months earns I = 1,000 × 0.02 × 6 = 120, and the amount is 1,120.
Yes. Because the formula is linear, 6 months at 12% a year (t = 0.5 year) earns I = P × 0.12 × 0.5, exactly 6% of the principal. On 1,000 that is 60.00. The calculator accepts decimals.
Because t counts how many times the rate is applied. A rate of 2% a month applied for "6" only makes sense if 6 means months. If time comes in days, convert the rate (2% a month = 2 ÷ 30 % a day on the commercial basis) or the time (180 days = 6 months).
The amount is the principal plus the interest: A = P + I. That is why A = P × (1 + r × t). On 1,000 at 2% a month for 6 months, I = 120 and A = 1,120; the factor (1 + r × t) = 1.12 says the principal grew 12% in total.