You want to know your total interest payment for the entire loan. To start, you'd multiply your principal by your annual interest rate, or $10,000 × 0.05 = $500.
For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest.
The principal amount is Rs 10,000, the rate of interest is 10% and the number of years is six. You can calculate the simple interest as: A = 10,000 (1+0.1*6) = Rs 16,000. Interest = A – P = 16000 – 10000 = Rs 6,000.
At 5.00%, your $100,000 would earn $105,116 per year.
Use the formula A=P(1+r/n)^nt. For example, say you deposit $5,000 in a savings account that earns a 5% annual interest rate and compounds monthly. You would calculate A = $5,000(1 + 0.00416667/12)^(12 x 1), and your ending balance would be $5,255.81. So after a year, you'd have $5,255.81 in savings.
5% APY: With a 5% CD or high-yield savings account, your $50,000 will accumulate $2,500 in interest in one year.
So, if the interest rate is 6%, you would divide 72 by 6 to get 12. This means that the investment will take about 12 years to double with a 6% fixed annual interest rate.
According to Rachel Sanborn Lawrence, advisory services director and certified financial planner at Ellevest, you should feel OK about taking on purposeful debt that's below 10% APR, and even better if it's below 5% APR.
Simple interest calculation examples
Say you have a savings account with $10,000 that earns 5% interest per year. Expressed as a decimal, the interest rate is 0.05, so the formula would be: Interest = $10,000 * 0.05 * 1. The interest earned in this example equals $500.
Formula: Simple Interest (SI) = Principal (P) x Rate (R) x Time (T) / 100. Example: If you invest Rs1,000 with a 5% annual interest rate for 3 years, you'd earn Rs150 in simple interest.
Simple interest is paid only on the money you deposit. So, for example, if you put $10,000 into a savings account that pays simple interest of 4% per year, after one year you'd earn $400 ($10,000 x 0.04), for a total of $10,400.
For example, if you borrowed $100 from a friend and agree to repay it with 5% interest, then the amount of interest you would pay would just be 5% of 100: $100(0.05) = $5. The total amount you would repay would be $105, the original principal plus the interest.
5% = 0.05 . Then multiply the original amount by the interest rate. $1,000 × 0.05 = $50 . That's it.
Pay off your most expensive loan first.
Then, continue paying down debts with the next highest interest rates to save on your overall cost. This is sometimes referred to as the “avalanche method” of paying down debt.
To calculate interest rates, use the formula: Interest = Principal × Rate × Tenure. This equation helps determine the interest rate on investments or loans.
Those with a 640 or higher credit score are likely to find a number of options for a $10,000 personal loan; those with higher scores may have more options as well as more favorable terms.
How much of a difference does this make? If you deposit $50,000 into a traditional savings account with a 0.46%, you'll earn just $230 in total interest after one year. But if you deposit that amount into a high-yield savings account offering, say, 4.60% APY,* your one-year interest soars to over $2,301.25.
Here, \[P\] is principal, \[r\] is rate of interest and \[t\] is time in years. Substitute 10000 for \[P\], 5 for \[r\] and 1 for \[t\] in equation (1) to obtain the interest at the end of one year. Thus, the interest at the end of the one year is Rs. 500.
Certificates of Deposit (CDs)
In return, you'll get more interest than with a savings or other account you can access any time. One-year CDs are currently paying rates of 3.50 – 4.50%, which comes out to $2,000 in interest on a $50,000 CD.
Financial experts often recommend maintaining an emergency fund of three to six months' worth of expenses. If $10,000 fits this guideline based on your expenses, it's the right amount to keep in a savings account.
Here are three major benefits: Higher rates: Rates on high-yield savings accounts are approaching 5% right now. That's equivalent to an extra $500 earned on a $10,000 deposit over one year, simply made by transferring funds from a regular account into a high-yield one.