How to Calculate Interest

Calculating interest is a quick and easy task with the right forumlas or tools. But first you should learn the difference between compound and simple interest.

Compound interest is calculated using the starting principal and includes the interest accumulated.

Looking for a Compound Interest Equation? Use this formula:

FutureValue = StartingValue(r/n +)nt

  • FutureValue = future value of the investment
  • StartingValue = Starting deposit
  • r = interest rate
  • n = times annually interest is compunded
  • t = years of the investment

Simple Interest Formula

Simple Interestvaries from Compound Interest by only adding interest to the Principal . All interest accured is withdrawn.

Looking for a Simple Interest Equation? Use this formula:

Interest = Principal * Rate * NumberOfYears

  • Interest = total amount of interest
  • Principal = The starting amount
  • InterestRate = Interest rate charged each year in decimals
  • NumberOfYears = is the time in years of the loan.