Q&A for How to Calculate Interest

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How can I determine what the interest rate is based on the interest payment?

Ed Rozmiarek

Community Answer

Use the formula, Interest = Principal x Rate x Time, and rearrange it algebraically to solve for the rate. Rate = Interest / (Principal x Time). Then, fill in what you know to find the rate.

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If a friend loaned me $42,000.00 nine years ago, how much interest would it have earned?

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It depends on the interest rate he gave you. If you had, for example, five percent interest every year, it would be (1,05^9)*42,000USD, which would be approximately 65,156 USD.

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How can I calculate the interest earned on $400.00 in a regular savings account?

Ed Rozmiarek

Community Answer

You need to know the interest rate of the account. You also need to know if the interest compounds continuously, quarterly, or annually. Savings accounts generally do not pay much. Let's assume a low rate of 1% to see the calculation and further assume that it compounds annually. Your actual amount may be different depending on these assumptions. The formula is given in the article above, Value = P(1+r/n)^(nt). P is the principal of $400. R is the rate, which we assume to be 0.01, and n is the number of times per year that it compounds, so n=1, and t=32, then number of years. Put these together : Value = 400*(1.01)^32 = 400*1.375 = $550.

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What interest rate will I earn if I deposit $1000.00 and after 8 years I earn $163.94 interest?

Ed Rozmiarek

Community Answer

Use the formula, Interest (I) = P*r*t, but rearrange the equation to solve for the interest rate. This is r=I/(P*t). Fill in the values you know to get r=163.94/(1000*8)=163.94/8000=0.020. Thus, you would earn 2% interest.

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How do I set up a specific equation?

Community Answer

Interest equals the principal times rate times time. For example, if the principal is $230, the rate is 3%, and the time is 1 year, you have the equation: i ( interest) = 230 times 0.03 times 1 = 6.9.

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How much do I need to deposit at 1.5% to get an annual return of $1725.00?

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Use this equation if you ever want to figure out different amounts in the future with different interest rates. Solve for X. 1.5%X = $1,725. For this problem, divide .015 into $1,725 to get your answer of $115,000 is needed to earn $1,725 at 1.5%.

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How do I calculate interest on a past due invoice?

Community Answer

Interest on invoices and accounts payable normally used simple interest. You have an invoice for $100.00. If your invoice is dated May 5th, and you pay it on June 30th, when it is net 30, with 24% per annum interest (2% per month), you owe interest on 26 days because you should have paid on June 4th. Calculation is 26/365x24%x$100.00=$1.71.

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Question

How much simple interest is earned on $300 at 6% for 6 months?

Ed Rozmiarek

Community Answer

The principal is $300. The rate is 0.06. The term is half a year, or 0.5. Put them together as 300*0.06*0.5=9. You will get $9 interest.

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How can I figure out the interest earned on a 401k?

Ed Rozmiarek

Community Answer

Subtract the amount you put into the account from the total value after time, and this will tell you the amount of interest you earned. If you invested 1000, and you get out 1075, then you earned $75 interest. To calculate the approximate interest rate, use the formula r=I/t.

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