Calculate simple interest earned on an investment using I = P × r × t
This simple interest calculator computes the interest earned on an investment using the formula I = P × r × t. It is ideal for estimating returns on savings accounts, certificates of deposit, bonds, and other fixed-income investments where interest is calculated on the original principal.
Simple interest is commonly used for short-term loans, certain bonds, and savings accounts. Understanding how interest accrues on your investments or loans helps you compare financial products and make smarter borrowing and saving decisions.
The calculator uses the simple interest formula where interest equals principal times the annual rate times time in years. The total amount is the principal plus the calculated interest.
Simple interest is calculated only on the original principal amount, while compound interest earns interest on both the principal and previously accumulated interest. Compound interest grows faster, but simple interest is easier to calculate and is commonly used for short-term loans and certain bonds.
Yes, the same simple interest formula applies to loans. If you are borrowing money, the interest amount represents the cost of borrowing the principal at the specified rate for the given time period. Most consumer loans use compound interest, so check with your lender.
The Rule of 72 is a quick mental math shortcut: divide 72 by your annual interest rate to estimate how many years it takes for your money to double. For example, at 6% interest, 72 ÷ 6 = 12 years to double. This rule works best for rates between 4% and 15%.
Compounding frequency determines how often earned interest is added to your principal. Daily compounding earns more than monthly, which earns more than annual compounding. This calculator uses simple interest, so for compounding scenarios use our compound interest calculator for more accurate results.
The nominal rate is the stated annual rate before compounding, while the effective annual rate (EAR) accounts for the effect of compounding within the year. For example, a 5% nominal rate compounded monthly has an EAR of about 5.12%, meaning you earn slightly more than the nominal rate suggests.