🧮 Simple Interest Calculator
Calculate simple interest instantly with I = P·r·t. Solve for any variable, compute between dates with day-count conventions (Actual/365, Actual/360, 30/360), compare with banker's discount, and view detailed schedules.
🧮Calculator Inputs
The selected variable will be calculated from the others
Enter time in years (e.g., 2.5 for 2½ years)
📊Results
Enter values to calculate
Results will update automatically as you type. No Calculate button needed!
📚What is Simple Interest?
Simple interest grows linearly over time using the formula I = P·r·t and A = P(1+rt), where interest is calculated only on the principal amount (no compounding).
Quick Example:
$20,000 at 3% annual interest for 10 years → $6,000 interest; $26,000 total
💡Worked Example 1: Basic Simple Interest Calculation▼
Problem:
You invest $7,000 at an annual rate of 5% for 2.5 years. What is the interest earned and total amount?
Solution:
Step 1: Identify values: P = $7,000, r = 0.05, t = 2.5
Step 2: Calculate interest: I = 7,000 × 0.05 × 2.5 = $875
Step 3: Calculate total amount: A = P + I = $7,000 + $875 = $7,875
✓ Answer: Interest = $875; Total Amount = $7,875
📅Worked Example 2: Day-Count Convention Comparison▼
Problem:
Calculate interest on $15,000 at 6% annual rate from January 1, 2024 to July 1, 2024 (181 days) using both Actual/365 and Actual/360 conventions.
📊 Actual/365 (Standard)
Time: t = 181/365 = 0.4959 years
Interest: I = 15,000 × 0.06 × 0.4959 = $446.30
Amount: A = $15,446.30
📊 Actual/360 (Commercial)
Time: t = 181/360 = 0.5028 years
Interest: I = 15,000 × 0.06 × 0.5028 = $452.50
Amount: A = $15,452.50
⚠️ Key Insight: Actual/360 yields $6.20 more interest ($452.50 vs $446.30) because dividing by 360 makes each day represent a larger fraction of a year. Commercial lenders often use Actual/360 for this reason.
💵Worked Example 3: Banker's Discount vs Simple Interest▼
Problem:
A note with face value $10,000 is due in 180 days. A bank discounts it at 4% annual discount rate. What are the discount amount, proceeds, and equivalent simple interest rate?
Solution (Actual/360):
Step 1: Calculate time: t = 180/360 = 0.5 years
Step 2: Calculate discount: D = F × d × t = 10,000 × 0.04 × 0.5 = $200
Step 3: Calculate proceeds (present value): P = F - D = 10,000 - 200 = $9,800
Step 4: Equivalent simple interest rate: r = D/(P × t) = 200/(9,800 × 0.5) = 4.08%
✓ Discount = $200; Proceeds = $9,800; Equivalent rate ≈ 4.08%
💡 Note: Banker's discount calculates on the face value ($10,000), not the proceeds ($9,800), which is why the equivalent simple interest rate (4.08%) is higher than the discount rate (4%).
🔬Methodology & Technical Details▼
📅 Day-Count Conventions
Actual/365: Divides actual days by 365. Standard for most consumer loans and bonds. Most accurate for annual interest calculations.
Actual/360: Divides actual days by 360. Common in commercial and money-market instruments. Yields slightly higher interest (favorable to lenders).
30/360: Assumes 30-day months and 360-day years. Simplifies calculations for bonds and mortgages. May not reflect actual calendar days.
🔢 Rounding & Precision
- Interest rates: Displayed as percentages (e.g., 5.25%); calculated as decimals (0.0525)
- Currency amounts: Rounded to 2 decimal places (cents)
- Time calculations: Maintained at full precision until final result
- Day counts: Exact calendar days (accounting for leap years when applicable)
⚙️ Key Assumptions
- No compounding: Interest is calculated only on the principal, never on accumulated interest
- Linear growth: Interest accrues at a constant rate over time
- Single payment: All interest is paid at maturity (unless using periodic mode)
- Fixed rate: Interest rate remains constant throughout the period
🎯 When to Use Each Mode
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💡 Simple vs Compound Interest: Simple interest grows linearly (calculated only on principal), while compound interest grows exponentially (calculated on principal + accumulated interest). For loans and investments with compounding periods, use our Loan EMI Calculator which handles compound interest calculations.
❓Frequently Asked Questions
How do I calculate simple interest (I = P·r·t)?▼
Simple interest is calculated using the formula I = P × r × t, where P is the principal amount, r is the annual interest rate (as a decimal), and t is the time in years. For example, $10,000 at 5% for 3 years gives I = 10000 × 0.05 × 3 = $1,500. The total amount (A) is P + I = $11,500.
What's the difference between Actual/360 and Actual/365?▼
Actual/360 and Actual/365 are day-count conventions that determine how time (t) is calculated. Actual/360 divides the actual number of days by 360 (common for commercial loans and money markets), while Actual/365 divides by 365 (standard for most consumer applications). Actual/360 results in slightly higher interest because the same number of days represents a larger fraction of a year.
How do I calculate simple interest between two dates?▼
To calculate interest between two dates, first determine the number of days between the dates, then apply a day-count convention (Actual/365, Actual/360, or 30/360) to convert days to years (t). Then use the standard formula I = P × r × t. Our calculator handles this automatically with all three conventions.
What is banker's discount and how is it different from simple interest?▼
Banker's discount is calculated on the face value (future amount) rather than the present value. The formula is D = F × d × t, where F is face value, d is discount rate, and t is time. The proceeds (P) = F - D. Simple interest is calculated on the principal (present value). Banker's discount results in a slightly higher effective interest rate because it discounts from a larger base.
How do I solve for principal/rate/time if I know the others?▼
The simple interest formula can be rearranged to solve for any variable: P = A / (1 + rt) for principal, r = (A/P - 1) / t for rate, and t = (A/P - 1) / r for time, where A is the final amount. Our calculator lets you select which variable to solve for and computes it instantly as you enter the other values.