Interest Earned
$0.00
Total Amount
$0.00
Learn Dedaandsons
Unit Converter
Calculate both Simple Interest and Compound Interest easily. Learn the methods with clear examples.
The method is simple. Write the Amount (Principal), for example: 10,000, then put a × (multiplication sign). Next write the Rate, for example 2%. Then multiply by the Time in years, for example 1. Finally divide everything by 100.
Formula steps: Multiply Principal × Rate × Time, then divide the result by 100.
• Total Interest = 10000 × 2 × 1 / 100
• Calculation:
10,000 × 2 = 20,000
20,000 × 1 = 20,000
20,000 ÷ 100 = 200
Easy tip: When dividing by 100, just remove the last two zeros from the number.
P = Principal, R = Rate of Interest (%), T = Time (years)
Compound Interest means you earn interest not only on the original principal but also on the interest that has already been added. This is why compound interest grows faster than simple interest.
The standard formula for the final amount (A) is:
Then Compound Interest = A − P
Where:
• P = Principal (starting amount)
• r = Annual interest rate (in decimal, so 5% = 0.05)
• n = Number of times interest is compounded per year
• t = Time in years
Common values of n:
• Annually → n = 1
• Semi-Annually → n = 2
• Quarterly → n = 4
• Monthly → n = 12
• Daily → n = 365
Example: Principal = $10,000, Rate = 5%, Time = 2 years, Compounded Annually (n = 1)
• A = 10000 × (1 + 0.05/1)1×2
• A = 10000 × (1.05)2
• A = 10000 × 1.1025 = $11,025
• Compound Interest = 11,025 − 10,000 = $1,025
Notice that with Simple Interest the interest would have been only $1,000. The extra $25 is the “interest on interest” — that is the power of compounding.