Simple Interest

Borrowing `P` over `t` periods at simple interest `r` means you have to pay `Pr` interest each period before reimbursing `P`. In total, you have to pay back: $$P \left( 1 + rt \right)$$

Example

You borrowed 10000 at a simple rate of 5% for 3 years.

  • Every year, you have to pay `\$10000 \times 5\% = \$500` interest.
  • The last year you also have to give back \$10000

In total, you have to give back: $$10000 \left( 1 + 0.05 \times 3 \right) = 1150$$