The formula for simple interest requires your initial principal balance, annual interest rate, and time in years. Say you put a sum of $800 into a savings vehicle with a 5% annual simple interest ...

Example of simple interest. The formula for simple interest requires your initial principal balance, annual interest rate, and time in years.

The total interest payable over the three-year period of this loan is $1,576.25, unlike simple interest, but the interest amount isn't the same for all three years because compound interest also ...