The formula and its rearrangements
Simple interest = (Principal × Rate × Time) ÷ 100, with rate per year and time in years. If any three of the four values (interest, principal, rate, time) are known, you can find the fourth by rearranging.
Worked examples
Example 1. Principal 5,000, rate 8% per year, 3 years. Interest = 5,000 × 8 × 3 ÷ 100 = 1,200.
Example 2. Interest of 900 is earned on 2,500 in 3 years. Rate = 900 × 100 ÷ (2,500 × 3) = 12% per year.
Related topics
Once you are comfortable, compare with compound interest, where interest earns interest. See how both are used in banking exam quantitative sections.
