# How to calculate simple interest

Simple interest is calculated only on the principal - the original amount of money borrowed or invested.

A typical interest rate is per year and the principal is usually borrowed or invested (and interest accrues) over a number of years.

## Simple interest formula

p = principal

r = interest rate per period (expressed as a percentage %)

n = number of periods

## Example

*Calculate the simple interest accrued on $100 invested at an annual simple interest rate of 5% over 2 years*

Related topic:

Compound interest formula

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