What is Simple Interest?
Simple Interest is a way to calculate interest where the interest amount remains the same each period. It is calculated only on the original principal amount, not on accumulated interest.
Formula
Simple Interest = (Principal x Rate x Time) / 100
Total Amount = Principal + Interest
Benefits of Simple Interest
- Easy to calculate and understand
- Predictable, fixed interest amounts
- Best suited for short-term loans or investments
Frequently Asked Questions (FAQs)
Is simple interest good for loans?
Yes, it's beneficial for borrowers as the interest does not compound over time.
Does simple interest change every year?
No, the interest remains the same throughout the tenure.
Can simple interest be used for long-term investments?
It's best suited for short-term goals. For long-term wealth, compound interest is preferred.