Total Interest Formula

Total Interest Formula : Using the total interest formula, one can calculate the percentage of the principal amount charged by the lender or bank to the borrower for the use of his assets or funds for a specific time period. In this section, we will discuss the various aspects of the total interest formula, and understand the variables involved.

What is the Total Interest Formula?

Total interest formula is a formula to find total simple interest on principal at a particular rate of interest over a period of time. The total interest formula for a given value can be expressed as,

I = P × R × T

where,

i = total interest
P = Principal Amount
R = interest rate on principal
t = time period

Let’s look at the applications of the total interest formula in the section below.

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Examples Using the Total Interest Formula

Example 1: Find the simple interest on $36,000 for a period of 4 years at 12% per annum.

Solution:

To find: total interest
Given,
Principal amount = 36,000
interest rate = 0.12
Time = 4 years.

Using the total interest formula,
I = P × R × T
I = 36000×0.12×4
= $17,280.

Answer: Simple Interest $17,280.

Example 2: Find the principal amount for which the total interest for 3 years comes to $20,000 at 10% interest.

Solution:

To find: principal amount.
Given,
Total interest = $20,000
interest rate = 0.10
time = 3 years

Using the total interest formula,

I = P × R × T

20000 = P×0.10×3
P = 20000 / (0.10×3)
P = 66,666.67

Answer: The principal amount is $66,666.67.