How do you compute simple interest?

Simple interest is calculated using the formula that takes into account the principal amount, the interest rate, and the time the money is borrowed or invested. The formula, Simple Interest = principal × rate × time, provides a straightforward way to determine the total interest earned or paid over a specific duration.

In this formula:

• The principal is the initial amount of money invested or borrowed.

• The rate is the annual interest rate (expressed as a decimal).

• Time typically represents the duration for which the money is borrowed or invested, usually measured in years.

By multiplying these three elements together, you can accurately compute the total simple interest accrued. This approach is foundational in understanding basic financial principles, making it a vital skill for both personal finance and educational purposes in mathematics.