What is the Formula for Simple Interest?

The formula for calculating simple interest is the same worldwide, including the Philippines. Simple interest is calculated using the following formula:

$\text{Simple Interest}(SI)=P\times R\times T$

Where:

• $SI$ is the simple interest,
• $P$ is the principal amount (the initial amount of money),
• $R$ is the rate of interest per time period, and
• $T$ is the time the money is invested or borrowed for, expressed in years.

In the context of the Philippines, if you’re dealing with a loan or investment in a Philippine financial institution, make sure to use the interest rate in the appropriate form. For example, if the interest rate is given per annum, make sure to express the time ($T$) in years. If the interest rate is monthly, you may need to convert it to an annual rate and adjust the time accordingly.

Suppose you have deposited 50,000 PHP in a savings account with an annual interest rate of 5%. If the interest is compounded annually, you can use the simple interest formula to find out how much interest you’ll earn after a certain period.

• $P=50,000\text{PHP}$ (Principal amount)
• R = 5% (annual interest rate)
• $T=2\text{years}$ (Time)

Now, plug these values into the simple interest formula:

$\text{Simple Interest (SI)}=P\times R\times T$

• $\text{SI}=50,000\text{PHP}\times 0.05\times 2$
• SI=5,000PHP

So, after 2 years, you would earn 5,000 PHP in simple interest on your initial deposit of 50,000 PHP at an annual interest rate of 5%. Note that this is a simplified example, and in real-world scenarios, the interest might be compounded differently (monthly, quarterly, etc.), and other factors such as taxes could come into play.