What Is Simple Interest?

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What Is Simple Interest?

When any investor lend money to the person who wants to use it, the person who receives the interest pays back the amount of the money he receives, along with the money he pays for the use of the money called interest. Interest is the income of the money invested. The first deposit is called the principal. The sum of the principal and interest is known as the amount, the accumulated value or the future value.

A simple interest rate is a type of interest in which interest is not accrued; the principal (initial interest) is equal to the annual interest rate and the number of years (the number of years may be decimal, such as 0.5 years).

Typically interest rates are expressed in percentages like 50% and 80% per annum. However, in financial calculations, these numbers are written in decimal, such as 0.50, 0.80.
Principal Interest Calculation
The formula used in calculating simple interest is:

F = S X I x n

Here,

F = Interest,

S = Principal,

I = interest rate,

N =number of Days / year as day

Number of days = interest number of days executed,

The year as day = usually represents 360 days.

For example, how many TL interest is paid after 72 days for a 20 million TL debt with a 50% annual interest rate?

F = 20,000,000 x 0.50 x (72/360) = 2.000.000 TL

In Excel, the ACCRINTM function should be used for the amount of interest in the future. If the sequence of arguments that need to be written in the function is not remembered, then the ACCRINTM function must be selected from the list of functions. The list of functions should be brought to the screen by clicking on the topic on the standard toolbar.

There are also other formulas with the same function used in calculating interest rates. These formulas are::

F=Ant / 100 (used in annual interest calculations)

F=Ant /1200 (used in monthly interest calculations)

F=Ant / 36000 (used in daily interest calculations)

Here,

a = current value, principal,

n = duration (year/Month/Day)),

F = interest amount,

t = represents the interest rate.