How Do You Calculate Interest?

There are two ways to calculate the amount that has been earned as an interest on a certain amount. The first method is the simple interest and other one is compound interest. As the name itself suggests, calculating interest on simple interest is quite easy and the formula that you can use to calculate this kind of interest is following: r x p x t / 100. In the formula r, p and t stand for rate of interest, principal amount and time respectively.
       
When you are calculating compound interest you will have to apply a different formula altogether to calculate it. First of all you will have to calculate the amount that comes as a result of the accumulation of principal and interest. The accumulation can be calculated with the following formula: P (1+ r/100) ⁿ.

Interest is of two types. Firstly there is simple interest where a fixed amount is calculated on the principal amount for a given period of time. If it calculated on say an "x" amount for a couple of years then the interest amount remains the same for all those years unless the principal amount is increased.

Compound interest on the other hand involves each subsequent amount of interest earned being added or compounded to the principal amount for subsequent interest calculations.

Simple interest can be calculated a simple formula of Interest being equal to the product of the principal, interest rate and term (time). The formula of compound interest on the other hand is Principal Amount × (1+Rate of Interest) ^Period. Period here refers to Time.

9. Justin Benedict borrows $11,000, and agrees to repay it in monthly payments of $253.11 for 60 months. Find the approximate annual percentage rate for the loan.

8% interest on $3,051.26 starting 2/2001 to 8/2007

The monthly interest rate is 8%.

How do u find interest if you go 10% p.a. Simple interest if you want $500 interest after 5 years