The formula for simple interest requires your initial principal balance, annual interest rate, and time in years. Say you put a sum of $800 into a savings vehicle with a 5% annual simple interest ...

The formula for simple interest requires your initial principal balance, annual interest rate, and time in years. Alyssa Powell/Insider Variables in a formula ...

If you'd like to calculate a total value for principal and interest that will accrue over a particular period of time, use this slightly more involved simple interest formula: A = P(1 + rt).

Simple Interest Formula . The formula for calculating simple interest is: ... PV = $10,000, FV = $16,000, and nt = 5, so the variable “i” has to be calculated.

Compare that with earning only simple interest and no compounding: With the simple interest formula (Interest = $10,000 x 0.04 x 5), you can see that your simple interest would be only $2,000.

By becoming familiar with the two main interest formulas, you can quickly calculate interest earned with a basic scientific calculator. Information Needed to Start First, you need to know your ...

Learn the difference between simple and compound interest, what happens when you open a bank account or take a loan, with a KS3 Maths guide from BBC Bitesize.