How to Calculate Simple Interest: A Worked Example
A step-by-step worked example of the simple interest formula, plus how to solve for principal, rate, or time instead.
Simple interest calculations follow the same formula every time — here's exactly how the numbers work out for a common example.
Worked example
| Input | Value |
|---|---|
| Principal | $5,000 |
| Annual rate | 5% |
| Time | 3 years |
| Interest | $5,000 × 0.05 × 3 = $750 |
| Total repayment | $5,000 + $750 = $5,750 |
Working backward
If you instead knew the $750 interest, the 5% rate, and the 3-year term, but not the principal, the same formula rearranges: principal = $750 ÷ (0.05 × 3) = $750 ÷ 0.15 = $5,000 — the original number, confirming the formula works identically in either direction.
Try any combination of known and unknown values in the Simple Interest Calculator.