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Glossary
Investing Basics
beginner

Simple Interest

Interest calculated only on the original principal amount, producing steady, linear growth.

Simple interest is calculated only on the original principal, without factoring in interest that has already accumulated, so a balance grows in a straight line rather than an accelerating curve.

It is calculated as principal × rate × time. Over long periods, compound interest pulls meaningfully ahead of an equivalent simple-interest rate, which is why the distinction matters most for long-term savings and debt.

Formula

I = P \times r \times t

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