Explain The Meaning Of Simple Interest

It s an introduction to the concept of interest in general.

Explain the meaning of simple interest. The concept of compound interest is explained on future value of a single sum page. Simple interest is called simple because the amount of the principal the amount of the loan itself and the rate of interest don t change over time. In the real world your interest whether you re paying it or earning it is usually calculated using more complex methods.

Simple interest 0 03 x 1 000 30. Simple interest is an easy method of calculating the interest for a loan principal amount simple interest is a concept which is used in most of the sectors such as banking finance automobile and so on. One is the simple interest and other is the compound interest.

Simple interest is an easy and simple tool for estimation of the interest earned or paid on a given principal amount for a given time frame. When you make a payment for a loan first it goes to the monthly interest and the remaining goes towards the principal amount. The simple interest calculation provides a very basic way of looking at interest.

Interest is a fee which is paid for having the use of money. Money that is paid only on an original amount of money that has been borrowed or invested and. However it does not take into account the effects of compounding which is the process of earning interest on principal plus interest that was earned.

Why simple interest is important. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days. There may also be other costs factored into a loan than just interest.

Simple interest is a quick and easy method of calculating the interest charge on a loan.