Simple interest: Difference between revisions
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Simple interest is a method of calculating and quoting interest which takes no account of interest on interest. | |||
So the total interest for a given period is calculated simply by multiplying or dividing the simple annual interest rate by the relative length of the interest period. | So the total interest for a given period is calculated simply by multiplying or dividing the simple annual interest rate by the relative length of the interest period. | ||
Simple interest is the usual basis of quotation for periods up to and including one year. | Simple interest is the usual basis of quotation for periods up to and including one year. | ||
<span style="color:#4B0082">'''Example: Simple interest calculation'''</span> | |||
When the daily rate of GBP interest is quoted as 5.11%, | |||
this means that the amount of interest per day is given by the quoted simple annual rate of 5.11% | this means that the amount of interest per day is given by the quoted simple annual rate of 5.11%, | ||
multiplied by 1/365 (to reflect one day in a 365 day year): | multiplied by 1/365 (to reflect one day in a 365 day year): | ||
= 5.11% x 1/365 | = 5.11% x (1/365) | ||
= 0.014% per day. | = 0.014% per day. | ||
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== See also == | == See also == | ||
* [[ | * [[Compound]] | ||
* [[Compound interest]] | * [[Compound interest]] | ||
* [[Compounding effect]] | |||
* [[Day count conventions]] | |||
* [[Effective annual rate]] | |||
* [[Interest]] | * [[Interest]] | ||
* [[LIBOR]] | * [[LIBOR]] | ||
* [[Money market]] | * [[Money market]] | ||
* [[Nominal annual rate]] | |||
* [[Periodic rate of interest]] | * [[Periodic rate of interest]] | ||
* [[Periodic yield]] | |||
* [[Simple annuity]] | |||
* [[Simple average]] | |||
* [[Simple investment accounting]] | |||
* [[Time value of money]] | |||
==Other | ==Other link== | ||
[http://www.treasurers.org/node/9356 Students: Simple solutions, The Treasurer, September 2013] | [http://www.treasurers.org/node/9356 Students: Simple solutions, The Treasurer, September 2013] | ||
[[Category: | [[Category:Cash_management]] | ||
[[Category:Financial_products_and_markets]] | |||
[[Category:Liquidity_management]] | |||
Latest revision as of 16:32, 16 September 2022
Simple interest is a method of calculating and quoting interest which takes no account of interest on interest.
So the total interest for a given period is calculated simply by multiplying or dividing the simple annual interest rate by the relative length of the interest period.
Simple interest is the usual basis of quotation for periods up to and including one year.
Example: Simple interest calculation
When the daily rate of GBP interest is quoted as 5.11%,
this means that the amount of interest per day is given by the quoted simple annual rate of 5.11%,
multiplied by 1/365 (to reflect one day in a 365 day year):
= 5.11% x (1/365)
= 0.014% per day.
See also
- Compound
- Compound interest
- Compounding effect
- Day count conventions
- Effective annual rate
- Interest
- LIBOR
- Money market
- Nominal annual rate
- Periodic rate of interest
- Periodic yield
- Simple annuity
- Simple average
- Simple investment accounting
- Time value of money
