Simple interest is calculated as an amount of interest payable over a period of time on a given sum of money invested. Interest on amount of $100 at a rate of 5% per annum would be $5.00. This rate is usually fixed and offered to depositors on the basis of a straightforward payment without compounding, or calculating interest payable on interest received during the calculation period. In some cases simple interest is paid on an average value of variable amounts deposited in various forms of bank accounts.
Examples of Simple Interest:
|Savings accounts annual calculation method.|
Some forms of investment bond.