Posted in Finance, Accounting and Economics Terms, Total Reads: 802
Definition: Simple Interest
Simple interest is the interest which doesn't take compounding into consideration. That is precisely the reason it is also called simple interest as its not complicated as the compound interest calculation.
Its applicable for financial things like Short term loans or other short term instruments where compounding can be ignored. Mainly the concept of time value of money is being ignored as time is too less.
It is calculated as
Simple Interest = Principal * Interest Rate * Duration