Simple Interest Formula
One formula, four variables — here is everything you need to use it confidently.
SI = (P × R × T) / 100
Amount = P + SI
What each variable means
| Symbol | Meaning | Typical units |
|---|---|---|
| P | Principal — the starting sum | any currency |
| R | Annual interest rate in percent | % per year |
| T | Time in years (months ÷ 12) | years |
| SI | Interest earned after T years | same as principal |
Worked example
Question: How much interest does ₹20,000 earn in 2½ years at 7.5% simple interest?
- Convert time: 2½ years = 2.5 years (or 2 years + 6 months → 2 + 6/12).
- SI = P × R × T ÷ 100 = 20,000 × 7.5 × 2.5 ÷ 100
- 20,000 × 7.5 = 150,000; × 2.5 = 375,000; ÷ 100 = 3,750
- SI = ₹3,750; Final amount = 20,000 + 3,750 = ₹23,750
Key properties
- Each year adds the same amount — growth is linear.
- Doubling T doubles the interest; doubling R also doubles it.
- It is interest earned, not an annualized return on a growing balance.
- Real loans may compute this daily or monthly using a different day-count convention — always check the product's terms.