Simple interest
Interest is the fee charged for the use of money. At simple interest, interest is calculated on the invested principal over the whole term of the loan.
When the simple interest method is used, interest isn't added to the principal at the end of each period as it is done in the compound interest method.
Example
| • | What is the interest on $1,000 invested for 6 months at 7 % simple interest?
Answer: $35.00. |
Related topics
| Compound interest |
| Single Payment |
| Compounding and payment frequencies |