Interest Rate Formula

About Interest Rate Formula

The interest rate, which is a percentage of the principal amount, charged by the lender or bank to the borrower for the use of its assets or money for a specified time period can be calculated using the interest rate formula. The interest rate is the amount a bank pays its depositors for keeping money in a savings account, recurring deposit, or fixed deposit.

What is Interest Rate Formula?

  • The interest rate formula is used to calculate the amount of money that must be repaid on a loan as well as the interest earned on fixed deposits, mutual funds, and other investments. The interest rate formula is also useful for calculating credit card interest. The following formula can be used to compute the simple interest rate for a given amount:
    • Interest Rate = (Simple Interest × 100)/(Principal × Time)
    • The following formula can be used to calculate the compound interest rate for a given amount:
    • Compound Interest Rate = P (1+i)t –P

Interest Rate Formula

  • In terms of simple interest, the interest rate formula is:
  • Interest Rate = (Simple Interest × 100)/(Principal × Time)
  • In terms of compound interest, the interest rate formula is:
  • Compound Interest Rate = P (1 + i)t –P
  • Here,
    • P = principal amount
    • i = r = rate of interest
    • t = time period

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Interest Rate Formula

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