Formula for Calculating Simple Interest
Calculating simple interest is a straightforward process that can be done using a simple formula. The formula for calculating simple interest is:
Simple Interest = Principal × Rate × Time
Where:
- Principal is the initial amount of money
- Rate is the interest rate per period
- Time is the number of periods
Simple Interest = $1,000 × 0.05 × 2 = $100
So, the simple interest on $1,000 at an interest rate of 5% per year for 2 years would be $100.
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