Home
Back
Interest Formula:
| From: | To: |
Simple interest is a method of calculating the interest charge on a loan or savings based on the original principal amount. It does not compound, meaning interest is not added to the principal for subsequent calculations.
The calculator uses the simple interest formula:
Where:
Explanation: The formula calculates interest earned or paid based on the original principal amount over a specified time period at a given annual rate.
Details: Understanding interest calculations helps individuals make informed financial decisions about savings, investments, and loans. It's essential for financial planning and comparing different financial products.
Tips: Enter the principal amount in CAD, annual interest rate as a percentage, and time in years. All values must be positive numbers.
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 from previous periods.
Q2: Is this calculator specific to Canadian financial products?
A: While the currency is in CAD, the simple interest formula is universal and can be applied to any savings or loan product that uses simple interest calculation.
Q3: How often is interest typically paid on savings accounts?
A: Interest payment frequency varies by financial institution - common frequencies include monthly, quarterly, semi-annually, or annually.
Q4: Are there taxes on interest earned in Canada?
A: Yes, interest income is generally taxable in Canada and must be reported on your annual tax return.
Q5: Can this calculator be used for loan interest calculations?
A: Yes, the same formula applies for calculating interest on simple interest loans, though most modern loans use compound interest calculations.