What is the Formula for Simple Interest?

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The formula for simple interest is:

SI = P x R x T

where:

  • SI is the simple interest earned or paid
  • P is the principal amount (initial amount borrowed or invested)
  • R is the interest rate (as a decimal, not a percentage)
  • T is the time period (in years)

Note: You typically need to convert the interest rate from a percentage to a decimal by dividing by 100. For example, if the interest rate is 5%, then R = 5 / 100 = 0.05

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