What Is Simple Interest Rate?

Simple Interest Rate in financial terms is the rate at which a fixed amount accumulates per year on a sum of money lent or kept in a bank. The simple interest rate is generally expressed on a yearly basis; it can also be expressed on a quarterly, monthly or on a weekly basis.

To calculate Simple Interest the formula given below can be used
Simple Interest = P * R * T
where P is the principal or original amount lent or deposited,
R is the simple interest rate
T is the time period, which in this case is one year, for which the sum of money is lent or deposited.

For example if one lends a sum of $1000 and receives an amount of $100 as interest after one year then the simple interest rate will be 10% expressed as follows
Simple Interest Rate = R = 100 / 1000 = 0.01 = 10%

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