Interest (Simple and Compound)

Simple interest is a method of calculating interest on a loan or investment based only on the original principal amount. It does not take into account any additional interest that may accrue over time.

The formula to calculate simple interest is:

\[ I = P \times r \times t \]

Where:

- \( I \) is the simple interest.

- \( P \) is the principal amount (the initial sum of money).

- \( r \) is the annual interest rate (expressed as a decimal).

- \( t \) is the time period (in years).

Simple interest is calculated using three key components: the principal amount, the interest rate, and the time period. It is commonly used for short-term loans or investments where interest is calculated based on the initial amount borrowed or invested. Unlike compound interest, which takes into account the accumulation of interest over time, simple interest remains constant throughout the term of the loan or investment.