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Simple interest

AnalyticsTrade Team
AnalyticsTrade Team Last updated on 26 Apr 2023

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Simple Interest

Simple interest is a type of interest calculation that is based on the principal amount of a loan or deposit. It is calculated as a percentage of the principal amount and is paid periodically, usually at the end of each period. The amount of interest paid is determined by the interest rate, the principal amount, and the length of the loan or deposit. Simple interest is different from compound interest, which is calculated on the principal amount plus any accumulated interest.

History of Simple Interest

The concept of simple interest dates back to ancient times, when it was used to calculate the interest on loans. In the Middle Ages, it was used to calculate the interest on deposits. In the modern era, it is still used to calculate the interest on loans and deposits, as well as other financial instruments such as bonds and mortgages.

Comparison of Simple Interest and Compound Interest

Type of Interest Calculation
Simple Interest Principal x Interest Rate x Time
Compound Interest Principal x (1 + Interest Rate)Time

Summary

Simple interest is a type of interest calculation that is based on the principal amount of a loan or deposit. It is calculated as a percentage of the principal amount and is paid periodically, usually at the end of each period. The amount of interest paid is determined by the interest rate, the principal amount, and the length of the loan or deposit. For more information about simple interest, you can visit websites such as Investopedia, Bankrate, and The Balance.

See Also

  • Compound Interest
  • Interest Rate
  • Principal Amount
  • Loan
  • Deposit
  • Bond
  • Mortgage
  • Annuity
  • Compounding
  • Amortization

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