Simple interest is the interest which is earned on the original investment (the principal amount) for a specific number of years. Here are a few methods to calculate simple interest.
Method 1
Suppose the annual interest rate is 6% (0.06) on a $1000 investment for 3 years. Then
Interest for each year: $1000 x 0.06 = $60
Interest for 3 years: $60 x 3 = $180
Total amount after 3 years: $1180
Method 2
Second method is to use the simple interest calculation formula:
A = P (1 + rt)
where
A = Future value of the principal
P: Principal amount
r: Interest rate
t: Number of years
Suppose the interest rate is 5% on a $1000 debt taken for 5 years, then
P=$1000, r=0.05, t=5
A = P (1 + rt) = $1000 x (1 + (0.05 x 5))= $1000 x (1.25) = $1250
The future value will be $1250 after 5 years.
The simple interest will be $1250 - $1000 = $250