What is the Formula for Simple Interest?

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

Where:

  • is the simple interest,
  • is the principal amount (the initial amount of money),
  • is the rate of interest per time period, and
  • 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 () 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.

  • (Principal amount)
  • R = 5% (annual interest rate)
  • (Time)

Now, plug these values into the simple interest formula:

  • 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.

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CashLoanPH Changed status to publish 26/11/2023