Definition

Noun: * Interest calculated only on the original principal amount of a loan or deposit: Simple interest is a method of calculating interest where the interest charge is computed solely on the initial sum of money (the principal). It does not compound, meaning interest is not earned on previously accumulated interest.

Usage

Simple interest is commonly used in short-term loans, some types of bonds, and basic financial calculations. It is calculated using the formula: Interest = Principal × Rate × Time.

Examples

• Noun:
  • The bank offers a savings account with simple interest calculated annually.
  • For a short-term personal loan, they charge simple interest on the principal.
  • The difference between simple interest and compound interest becomes significant over long periods.

Advanced Usage

• "to calculate simple interest": to determine the interest amount using the simple interest formula.
  • You can easily calculate the simple interest if you know the principal, annual rate, and time in years.

Variants and Related Words

• Compound interest (n): Interest calculated on the initial principal on the accumulated interest from previous periods. This is the contrasting concept to simple interest.
  • Most savings accounts use compound interest, not simple interest.

Synonyms

• Non-compounding interest: A descriptive synonym emphasizing that the interest does not compound.

Antonyms

• Compound interest: Interest that is calculated on both the principal and accumulated interest.

Noun

1. interest paid on the principal alone