1. What is the Interest Rate Calculator?

The Interest Rate Calculator calculates annual interest on savings using the simple interest formula. It provides a quick way to determine how much interest your principal amount will earn over one year.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I_{year} \) — Annual interest earned (currency)
• \( P \) — Principal amount (currency)
• \( r \) — Annual interest rate (decimal)

Explanation: The formula calculates the interest earned on a principal amount at a given annual interest rate for one year.

3. Importance of Interest Calculation

Details: Calculating annual interest helps in financial planning, comparing investment options, and understanding the growth potential of your savings over time.

4. Using the Calculator

Tips: Enter the principal amount in currency and the annual interest rate as a decimal (e.g., 0.05 for 5%). Both values must be valid (principal > 0, rate ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus accumulated interest.

Q2: How do I convert percentage to decimal?
A: Divide the percentage by 100. For example, 5% becomes 0.05 as a decimal.

Q3: Is this calculator suitable for compound interest?
A: No, this calculator uses simple interest formula. For compound interest, a different calculator would be needed.

Q4: Can I use this for monthly interest calculations?
A: This calculator provides annual interest. For monthly interest, divide the annual rate by 12 and use the same formula.

Q5: What currencies can I use with this calculator?
A: You can use any currency as long as you maintain consistency between principal amount and interest result.