Add Yahoo as a preferred source to see more of our stories on Google. Knowing your loan's interest rate matters, as does learning how that rate is calculated. Interest is either simple or compound. If ...

Elvis Picardo is a regular contributor to Investopedia and has 25+ years of experience as a portfolio manager with diverse capital markets experience. Suzanne is a content marketer, writer, and ...

Simple interest is used when a company borrows money for a loan. Usually this amount will be on a monthly basis. The formula for simple interest is principal times the interest rate times the period.

Simple interest is paid only on the principal, e.g., a $10,000 investment at 5% yields $500 annually. Compound interest accumulates on both principal and past interest, increasing total returns over ...