Simple Interest

Simple Interest
A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate by the principal by the number of periods.

Simple Interest


Where:
P is the loan amount
I is the interest rate
N is the duration of the loan, using number of periods

Simple interest is called simple because it ignores the effects of compounding. The interest charge is always based on the original principal, so interest on interest is not included. This method may be used to find the interest charge for short-term loans, where ignoring compounding is less of an issue.


Investment dictionary. . 2012.

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Look at other dictionaries:

  • simple interest — interest calculated as a simple percentage of the original principal amount. Compare to compound interest. Bloomberg Financial Dictionary * * * simple interest simple interest ➔ interest * * *    The cost of borrowing, or the return on lending… …   Financial and business terms

  • Simple interest — Interest calculated only on the initial investment. Related:compound interest. The New York Times Financial Glossary * * * simple interest simple interest ➔ interest * * *    The cost of borrowing, or the return on lending money. It is calculated …   Financial and business terms

  • Simple interest — Simple Sim ple, a. [Compar. {Simpler}; superl. {Simplest}.] [F., fr. L. simplus, or simplex, gen. simplicis. The first part of the Latin words is probably akin to E. same, and the sense, one, one and the same; cf. L. semel once, singuli one to… …   The Collaborative International Dictionary of English

  • Simple interest — Interest In ter*est, n. [OF. interest, F. int[ e]r[^e]t, fr. L. interest it interests, is of interest, fr. interesse to be between, to be difference, to be importance; inter between + esse to be; cf. LL. interesse usury. See {Essence}.] [1913… …   The Collaborative International Dictionary of English

  • simple interest — see interest 5 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • simple interest — n [U] ↑interest that is calculated on the sum of money that you first ↑invested, and does not include the interest it has already earned →↑compound interest …   Dictionary of contemporary English

  • simple interest — n. interest computed on principal alone, and not on principal plus interest: cf. COMPOUND INTEREST …   English World dictionary

  • simple interest — noun uncount BUSINESS interest earned on money you have invested, calculated once a year on the PRINCIPAL (=the amount of money originally invested) ─ compare COMPOUND INTEREST …   Usage of the words and phrases in modern English

  • simple interest — noun interest paid on the principal alone • Hypernyms: ↑interest * * * noun : interest paid or computed on the original principal only of a loan or on the amount of an account often on the assumption that each day is 1/360of a year compare… …   Useful english dictionary

  • simple interest — N UNCOUNT Simple interest is interest that is calculated on an original sum of money and not also on interest which has previously been added to the sum …   English dictionary

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