1. What is Simple Interest?

Simple interest is a quick method of calculating the interest charge on a loan or investment. It is calculated by multiplying the principal amount by the interest rate and the time period.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (initial investment)
• \( r \) — Annual interest rate (in decimal form)
• \( t \) — Time in years

Explanation: The formula calculates the interest earned on the principal amount over a specified time period at a fixed annual interest rate.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps in financial planning, comparing investment options, and making informed decisions about savings and loans.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage, and time in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: How often is interest typically paid in savings accounts?
A: Most high-yield savings accounts pay interest monthly, though the calculation may be based on daily balances.

Q3: Are high-yield savings accounts FDIC insured?
A: Yes, most high-yield savings accounts at FDIC-member banks are insured up to $250,000 per depositor.

Q4: What's considered a good interest rate for savings?
A: Rates vary, but high-yield savings accounts typically offer rates significantly higher than traditional savings accounts.

Q5: Can interest rates change over time?
A: Yes, most high-yield savings accounts have variable rates that can change based on market conditions.