## Computation of Simple Interest

Simple Interest is computed on the initial principal amount and no interest is charged on the subsequent interests earned. Simple interest can by easily calculated using the formula, Interest = Principal x Time x Rate

Given,

• Principal = $2,400 • Simple Interest Rate R = 4.7% • Duration of loan is from March 11 to August 10 and repayment on August 11. • No of day T = 21+30+31+30+31+10 = 153 days • No of days in the year = 365 days Interest due on$2,400 for 153 days at 4.7% is computed as under:

Interest = Principal x Time x Rate

Interest = 2400 x (153/365) x 0.047

Interest = $47.28 Therefore, the total amount due on August 11 is the sum of initial principal and the interest earned during the period, which comes to$2,400 + $47.28 or$2,447.78