Interest Calculator
Solve for any missing interest variable. Choose between simple and compound interest, input any three values, and find the fourth.
About this Calculator
Solve for any missing interest variable. Choose between simple and compound interest, input any three values, and find the fourth.
Formula & Calculations
Formula
Simple I = P × R × T, Compound A = P(1+r)^tWhere:
- P=Principal amount
- r=Annual interest rate (as a decimal)
- t=Time period in years
- I=Interest amount earned or paid
- A=Final amount including interest (compound mode)
Assumptions
- For compound interest, assumes annual compounding frequency.
- Simple interest assumes interest is not reinvested.
- Time must be greater than zero for rate-based calculations.
Calculation Examples
Example 1
Simple interest on $10,000 at 5% over 3 years yields $1,500 in interest, with a total of $11,500.
Example 2
Compound interest at 6% over 5 years grows $5,000 to $6,691.13, earning $1,691.13 in interest.
Example 3
It takes 2.5 years for $20,000 to earn $2,000 in simple interest at 4% annually.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal amount. Compound interest is calculated on the principal plus accumulated interest from previous periods, creating a snowball effect where your money grows faster over time.
When is simple interest used?
Simple interest is commonly used for short-term loans, car loans where interest is pre-computed, some bonds, and certain student loans during deferment periods. Most savings accounts and long-term loans use compound interest.