What Is Simple Interest?
Definition
Simple Interest: Interest calculated on the principal alone for the whole term. The interest is not added to the principal, so it earns no interest itself.
Simple interest is interest calculated on the principal alone. The interest is not added to the principal, so it earns no interest. The interest is proportional to the principal, the annual rate and the time. Turkish banks pay interest on a single-term lira time deposit this way, counting the year as 365 days.
Where it appears in the formulas
A = P × (1 + r × t), and the interest is P × r × t. For a deposit the term is in days: gross interest = principal × annual rate × days / 365. The simple interest and deposit interest calculators use these formulas.