Data Source and Methodology

Simple interest is based on the classical time value of money identity \( I = P \times r \times t \), where principal \(P\) earns interest at an annual nominal rate \(r\) over elapsed time \(t\) expressed in years. This calculator automatically converts months or days to their year-equivalent so results stay comparable with annual rates.

Formula

Worked Example

Suppose you deposit $1,000 at a 5% simple annual rate for 18 months.

1. Convert time: \(t = 18 \text{ months} ÷ 12 = 1.5 \text{ years}\).
2. Compute interest: \(I = 1000 × 0.05 × 1.5 = 75\).
3. Total balance: \(A = 1000 + 75 = 1{,}075\).

Because interest does not compound, the nominal rate equals the effective annual rate.

Frequently Asked Questions

Can I enter fractional years or months?

Yes. The duration accepts decimals, so 2.5 years or 9.5 months works without extra conversions.

Why is the interest per year useful?

It shows the linear growth of simple interest. If you extend the loan to twice the time, the interest per year remains constant, so the total interest doubles.

What happens with negative rates?

The calculator allows zero rates but flags negative inputs. Use a compounded model if you need to evaluate real-world negative yields.

','\

I = P \times r \times t

A = P + I

Simple interest: \[ I = P \times r \times t \] Total amount: \[ A = P + I \] Where: \(P\) is the principal (initial amount) \(r\) is the annual interest rate expressed as a decimal \(t\) is time in years (months ÷ 12, days ÷ 365)