Logo
dictionary thesaurus

Notice: Undefined property: stdClass::$text in /home/b70ba15/public_html/dictionarywebster.com/view.php on line 298

simple interest

noun

Definition of simple interest

: interest paid or computed on the original principal only of a loan or on the amount of an account

Examples of simple interest in a Sentence

Recent Examples on the Web

 Few college students completed a course in personal finance while in high school, and three out of four young people in America cannot calculate the simple interest on a loan. — Julie Bunn, Twin Cities, "Julie Bunn: Concerned about college loans? You should be," 14 July 2019

First Known Use of simple interest

1798, in the meaning defined above

Keep scrolling for more

Keep scrolling for more

More Definitions for simple interest

simple interest

noun

Financial Definition of simple interest

What It Is

Simple interest is a basic formula for calculating how much interest to apply to a principal balance. The formula for simple interest is:

Simple Interest = Interest Rate x Principal Balance

How It Works

For example, let’s assume that John Doe puts $1,000 in his savings account. The bank pays 3% per year in interest. Using this information and the formula above, we can calculate how much interest he will earn in a year:

Simple Interest = 0.03 x $1,000 = $30

Why It Matters

Simple interest is a handy, easy tool for estimating the interest earned or paid on a certain balance in one period. However, it does not take into account the effects of compounding, which is the process of earning interest on principal plus interest that was earned earlier. This means it can dramatically understate the amount of interest earned or paid over time.

Source: Investing Answers

simple interest

noun

English Language Learners Definition of simple interest

finance : interest paid only on the original amount of money and not on the interest it has already earned

See the full definition for simple interest in the English Language Learners Dictionary

simple interest

Legal Definition of simple interest

see interest sense 5

WORD OF THE DAY

rambunctious

play

See Definitions and Examples

Get Word of the Day daily email!