Interest Formula
Before knowing what are interest formulas, let us recall what is meant by interest. The word "interest" means the extra amount earned by the investor along with the investment (or) the amount owed by the borrower along with the amount lent. There are two types of interests simple interest and compound interest. Let us know what are simple and compound interest formulas.
What Is Interest Formula?
The simple interest on a principal amount is the same every year. But the compound interest for a particular year depends upon the principal amount of that year and hence it varies every year. Here are the formulas for interest.
1. The simple interest formula is:
I = P × r × t
Here
 I = Simple interest
 P = Principal amount
 r = Rate of interest
 t = Time period
2. The compound interest formula is:
Here:
 n = 1, if the amount is compounded yearly.
 n = 2, if the amount is compounded halfyearly.
 n = 4, if the amount is compounded quartyearly.
 n = 12, if the amount is compounded monthly.
 n = 52, if the amount is compounded weekly.
 n = 365, if the amount is compounded daily.
Whenever you see the word "compound" or "compounded" in the problem then go applying this formula of compound interest. Let us see the applications of the interest formulas in the following section.
Solved Examples Using Interest Formula

Example 1: What is the simple interest on the principal amount of $10,000 in 5 years, if the interest rate is 15% per annum?
Solution:
To find: The simple interest using the given information.
The principal amount, P = $10,000.
The rate of interest, r = 15% = 0.15.
Time, t = 5 years.
Using the simple interest formula,
I = P × r × t
I = 10000 × 0.15 × 5 = 7500
Answer: The simple interest = $7,500.

Example 2: You have invested $1000 in a bank where your amount gets compounded daily at 5% annual interest. Then what is the compound interest that you get after 10 years?
Solution:
To find: The compound interest after 10 years.
The principal amount is P = $1000.
The rate of interest is, r = 5% =5/100 = 0.05.
The time in years is t = 10.
Since the amount is compounded daily, n = 365.
Using the compound interest formula:
Compound Interest = P (1 + r / n)^{n t}  P
\[ \begin{align} \text{Compound Interest} &= 1000 \left( 1+ \dfrac{0.05}{365}\right)^{365 \times 10}  1000\\[0.2cm] A &=\$ 648.66 \end{align}\]
Answer: The compound interest = $648.66.