Interest Rate Calculator
How to Calculate Interest Rate
When you borrow money with interest, you get some extra money for it, but you’re going to pay that extra money and interest, which is known as interest rate calculation. This is how you can calculate rest rate for various cases:
Simple Interest Formula
Simple interest is earned only on the initial principal amount. The formula is:
I=P⋅r⋅t
- I = Interest
- P = Principal (the amount borrowed or invested)
- r = Annual Interest Rate (in decimal form)
- t = Time (in years)
To solve for rrr (the interest rate):
Example:
Assuming you borrowed $1,000 for 2 years and disbursed $200 in interest:
Compound Interest Formula
Compound interest takes into account interest on both the principal and accumulated interest. The formula is:
- A = Total amount (principal + interest)
- P = Principal
- r = Annual Interest Rate (in decimal form)
- t = Time (in years)
To obtain rrr you rearrange the formula:
Example:
Whether you invested $1,000 and it became $1210 in 2 years.
