Simple Interest Formula / Calculation - Effects of Borrowing One Thousand over 5 Years

How to calculate interest on a loan or investment

The following calculation should help if perhaps you are looking for a mortgage interest formula or loan interest formula or alternatively you want an investment interest formula.

To calculate the interest on 1,000.00 at 5% interest per year after 5 year(s) we need to apply a simple formula or calculation.

The formula we'll use for this is the simple interest formula and it is applied as follows:

Where:

P is the principal amount or loan amount, 1,000.00.
r is the interest rate, 5% per year, which in decimal form is, 5/100=0.05
t is the term involved, 5 year(s) time periods.
So, t is 5 year time periods.

To find the interest, we multiply 1,000.00 x 0.05 x 5 which results in the following:

The interest payable is: 250.00 (Two Hundred and Fifty)

Usually now, the interest is added onto the principal to figure some new amount after 5 year(s), or 1,000.00 + 250.00 = 1,250.00. For example:

Using this calculation, if you borrowed the sum of 1,000.00, you would owe 1,250.00 in 5 years time.
If you loaned someone 1,000.00, you would be due 1,250.00 in 5 years time.
If owned something, like a 1,000.00 bond, it would be worth 1,250.00 in 5 years time.

What would be the interest charged be if I doubled up?

For a simple illustration of how the intestest would change if you were to simple double up the amount borrowed,i.e., Two Thousand over Five Years, click the following link... double the capital

What would be the interest charged be if I halved the loan amount?

For a simple illustration of how the intestest would change if you were to simple halve the amount borrowed,i.e., Five Hundred over Five Years, click the following link... Halve the loan amount

What would happen if I extended the term?

For a simple illustration of how the intestest would change if you were to simple double the length of time to repay the debt click the following... Double the term of the loan

What would happen if I reduced the term?

For a simple illustration of how the intestest would change if you were to simple reduce the length of time to repay the debt click the following... Halve the term of the loan

Disclaimer: The formulaes/calculators above should be used for guidance only. Please refer to the financial institution you are dealing with for exact methods of computation. Some institutions might implement other variations of the methods described.