How to Calculate Fixed Rate Interest on Savings

Banks, credit unions and other thrift institutions offer fixed rate savings products such as certificates of deposit (CDs) and passbook savings accounts. Learn how to calculate the interest you will earn on the dollars you deposit into these savings vehicles.

Instructions

1. Define your terms. You'll need information about your principal, your interest rate and the time your funds will be invested.

2. Principal is the amount you save. This will be represented by "P" in your formula. The interest rate, expressed as a decimal, will be abbreviated as "R" in your formula. "T" will represent the time your savings will be on deposit, expressed in years. Build your formula based on your terms. Plug in your dollar amount, interest rate and time frame into the formula and write it down.

3. Multiply your 3 terms together. The formula for this calculation is I = PRT.
   Interest = Principal x Rate x Time

References

• Simple Interest Examples