How to Calculate Simple Interest Rates
Simple interest refers to the method of interest calculation that does not take into consideration the effects of interest compounding. This simple method takes into account only the amount of interest earned, the initial amount and the time the money was left in the account. Finding the simple interest rate is useful if you are going to remove the interest from the account as it is paid, as with a fixed-income certificate of deposit.
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Instructions
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1
Subtract the initial account value from the final account value to find the interest earned. For example, if you started with $5,100 and finished with $5,974.65, you would subtract $5,100 from $5,974.65 to get $874.65.
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2
Divide the interest earned by the initial account value. In this example, you would divide $874.65 by $5,100 to get 0.1715.
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3
Divide the Step 2 result by the number of years the money earned interest to find the annual rate expressed as a decimal. In this example, if the interest was earned over 3½ years, you would divide 0.1715 by 3.5 to get 0.049.
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4
Multiply the annual interest rate expressed as a decimal by 100 to find the simple annual interest rate expressed as a percent. Completing the example, you would multiply 0.049 by 100 to find the annual simple interest rate is 4.9 percent.
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