What is the formula for interest rate?

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There are actually two main formulas you might be interested in, depending on whether you’re calculating the interest itself or trying to find the interest rate:

  • Simple Interest: This is the easiest formula and is best for situations where interest is applied only to the original principal amount. The formula is:Interest = Principal x Rate x Time

    Here’s what each variable represents: * Interest: The total amount of interest paid (I) * Principal: The initial amount borrowed or invested (P) * Rate: The interest rate as a decimal (r) (convert percentage rate by dividing by 100) * Time: The length of the time period (T) (in the same units as the interest rate – years for annual rates, months for monthly rates, etc.)

  • Finding the Interest Rate: This formula is used to isolate the interest rate when you know the other values. It rearranges the simple interest formula:Interest Rate = (Interest x 100) / (Principal x Time)

    Note: Be sure to express all values in the same units of time.

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