Simple Interest Formula

Simple Interest Formula

Future value is calculated by the following simple formula

Future value = P ( 1+ Rn)

R= rate of interest

N = number of period

P = Present value

Simple Interest Formula Example

Bank is offering a simple rate of interest 12% (p.a) . Mr. A wants to deposit $ 25,000 today. How much amount Mr. A will received in 4 years?

Solution

= $ 25,000 (1+ .12x4)

=$ 25,000 x 1.48

=37,000

In simple interest the interest in not re invested therefore the interest amount remains same for each year.