1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan or investment based on the original principal amount. It's commonly used for short-term loans or simple savings calculations.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( A \) — Future value of the investment/loan (USD)
• \( P \) — Principal investment amount (USD)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time the money is invested/borrowed for (years)

Explanation: The formula calculates how much your initial investment will grow over time with simple interest.

3. Importance of Simple Interest Calculation

Details: Understanding simple interest helps in financial planning, comparing investment options, and making informed decisions about loans and savings.

4. Using the Calculator

Tips: Enter principal amount in USD, interest rate as a decimal (e.g., 5% = 0.05), and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is simple interest different from compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: What are typical uses for simple interest?
A: Short-term loans, car loans, some bonds, and simple savings accounts often use simple interest.

Q3: How do I convert APR to decimal for the calculator?
A: Divide the percentage by 100 (e.g., 5% becomes 0.05).

Q4: Does the calculator account for additional deposits?
A: No, this calculator only works with a single initial principal amount.

Q5: Can I use this for partial years?
A: Yes, enter fractional years (e.g., 6 months = 0.5 years).