• Written By Varsha
  • Last Modified 12-10-2022

Simple Interest Formula: Calculation & Solved Examples


Simple Interest Formula: Simple interest is the method of calculating the amount of interest charged on a sum at a particular rate and specified time period. Simple Interest Calculator will help one calculate the amount of Interest they have to give on a certain amount.

We need to first understand Interest. For instance, when you borrow money from a bank, you must pay a fee in addition to the amount borrowed. The extra money you pay is known as Interest. Some money lenders and financial institutions impose this Interest on borrowed funds. You will study more about calculating simple interest and formula of simple interest with various examples in this article.

What Is the Formula of Simple Interest?

The simple interest of an amount is calculated by multiplying the interest rate by the principal amount and the time period. This time period usually would be in years.

Formula of SI =\(\frac{PXTXR\ }{100}\)

SI Formula Notations:

  • P = Principal Amount
  • T = Time in Years
  • R = Rate of Interest per Annum

After the Simple Interest is calculated, we will have to calculate the total amount. In order to calculate the total amount, the following formula is used:

Total Amount = SI + P
  • SI = Simple Interest
  • P = Principal Amount

Simple Interest Formula for Months

In the above section, we have seen how to calculate simple interest for years. Some people borrow money on a monthly basis as well. The monthly simple interest rate formula is given below:

  • Simple Interest For n Months =\(\frac{PXnXR\ }{12X100}\)

Here n denotes the number of months.

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Simple Interest All Formulas

There are different scenarios in which we will have to apply the Simple Interest formulas in different ways. All the formulas of Simple Interest in Maths are given below. Students can also download the Simple Interest formula PDF for free.

Scenarios Formulas
To Calculate Just InterestI = PTR/100
To Calculate Principal AmountP = (I × 100) / RT
To Calculate Rate of InterestR = (I × 100)/ PT
To Calculate TimeT = (I × 100) / PR

Difference Between Compound Interest and Simple Interest Formula

Many students get confused with what is Simple Interest and Compound Interest. The difference between Simple and Compound Interest are tabulated below:

Simple InterestCompound Interest
Simple Interest is charged for the principal amount.Compound Interest is charged for the accumulated interest of previous periods.
In other words, it charges interest on interest.
S.I Formula = (P × T × R) ⁄ 100C.I. Formula = P(1+R⁄100)t − P
The principal amount remains constant.The principal amount keeps on varying.

Simple Interest Formula Example

Now that you have an idea about what simple interest is, check out the following examples to understand how simple interest concepts are applied in our day-to-day life:

Q.1: If Rs. 4 becomes Rs. 10 in 50 years at simple interest, the rate % p.a. is 

Ans: The rate % p.a. is 3%
S.I = 10 – 4 = 6
=>6 = (P × T × R) ⁄ 100 (using simple interest formula)
=> 6 = (4xRx50)/100 
=> R = 3%

Q.2: Simple Interest on a certain sum at the rate of 10% per annum for 6 years and 7 years differs by Rs.650/- What is the sum? 

Ans: The sum is Rs. 6500 
=> PRT/100 = 650 
=> P x 10 x 1/100 = 650 (using simple interest formula ) 
=> P = 6500

Q.3: A moneylender lends Rs. 60 and collects Rs. 66 at the end of four months. What is the rate of interest p.a.?

Ans: The rate of interest P.A is 30 % 
=> Interest = 66 – 60 
=> Interest = 6
=> 6 = 60/100 x R x 4/12 (using simple interest formula for months) 
=> R= 30%.

Q.4: Anoop borrowed Rs. 800 at 6 % p.a. & Rs. 1200 at 7 % p.a. for the same duration. He had to pay Rs. 1584 in all as interest. Find the time period. 

Ans: 12 years is the time period.
=>Interest at 1st rate for 1 year = 800 x (6×1)/100 = Rs. 48.
=> Interest for 1 year at 2nd rate = 1200 x (7 x 1)/100 = Rs. 84
=> Therefore, Total interest for 1 year = Rs. 132.
=> Hence, the required time = 1584/132 = 12 years.

Q.5: Simple interest on an amount at 4% per annum for 13 months is more than the simple interest on the same amount for 8 months at 6% per annum by Rs 40. What is the principal amount? 

Ans: The Principal Amount is Rs 12000. 

Interest for 13 months at 4%
Interest per year = 4%
interest per month = 4 ÷ 12 = 1/3 %
Interest for 13 months = 1/3 x 13 = 13/3 %

Interest for 8 months at 6%:
interest per year = 6%
interest per month = 6 ÷ 12 = 0.5%
interest for 8 months = 0.5 x 8 = 4% 

Let us consider Principle as x
13/3% of x – 4% of x = 40
1/3 % of x = 40
1% of x = 120
100% of x = 120 x 100 = Rs 12000

FAQs on Simple Interest Formula

The frequently asked questions on Simple Interest Formula are given below:

Q.1: What is simple interest?
Ans: Simple Interest is a method of calculating the interest amount for some principal amount.

Q.2: What is the formula to calculate the rate of interest?
The formula for calculating the rate of interest is:
R = (I × 100)/ PT

Q.3: How do you calculate Simple Interest?
Ans: There are plenty of Simple Interest Calculators available online. But if you have to calculate manually, then Simple Interest can be calculated by multiplying principal amount, time in years, rate of interest per annum divided by 100.
The SI Formula = PTR/100.

Q.4: How do I calculate Simple Interest monthly?
Ans: To calculate Simple Interest monthly, the following formulas can be used.
Monthly Simple Interest Formula = P X n X R / 12X100
Here, “n” denotes the number of months.

Q.5: Are compound interest and simple interest formula different?
Ans: Yes, the compound interest and simple interest formula are very different from each other.

Practice Simple Interest Questions with Hints & Solutions