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Question

What is simple interest?

2 years ago

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Daisy Schiller


1 Answer

Brian H Profile Picture
Brian H Verified Sherpa Tutor ✓

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Simple interest is calculated as follows:


Simple Interest (S) = (Amount to pay: P) X (Percentage Interest per unit of time: I) X (Repayment period / Number of units of time: N)


We can write this as:

S = P x I X N

or

S = PIN


So, if an amount to pay is £18,000, the yearly interest rate is 6% and we have 3 years to pay, then.


S = 18000(0.06)(3) = 3240


This means that the amount of interest to pay is £3,240.


Over the 3 year repayment period, we pay back: £18,000 + £3,240 = £21,240

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