Simple Interest Formula

Definition

Simple Interest denotes the direct calculation of interest to the principal sum of a loan or deposit (without compounding of previous interest rate periods)

Formula

$SI=\left[\sum _{i=1}^{d_{b}}({\frac {r_{i}\times n_{i}}{N}})\right]\ \times {\frac {N}{d_{c}}}$

Where

• $d_{b}$ is the number of business days in the interest period
• $d_{c}$ is the number of calendar days in the interest period
• $r_{i}$ is the interest rate applicable on business day i
• $n_{i}$ is the number of calendar days for which rate ri applies (on most days, ni will be 1, but on a Friday it will generally be 3, and it will also be larger than 1 on the business day before a holiday).
• N is the market convention for quoting the number of days in the year.

See Also

• Compound Interest Formula

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