How do you calculate simple interest per annum or year?
Simple interest is an interest rate calculated for the entire loan payment. It can be easily calculated by multiplying the loan amount, interest rate and time duration of the loan.
Formula to Find Simple Interest per Year
Simple Interest = (P x R x T ) / 100
P - Principal
R - Interest Rate
T - Time Duration of the Loan.
Step 1: Let us consider the values to calculate the Simple Interest.
Principal - Rs. 50,000
Interest Rate - 4%
Time period - 2 years.
Step 2: Substitute the values in the formula
SI = ( 50,000 x 4 x 2 ) / 100
= (50,000 x 8) / 100
Simple Interest =4000
Hence, the simple interest of the principal amount of Rs.50,000 is Rs. 4000 per year.