What it is for: Calculates the amount of interest on a principal, whether simple or compound interest, based on the interest rate and the period of time.
How it works: For simple interest, interest is calculated only on the initial principal, while in compound interest, interest is calculated on the initial principal and any previously accrued interest.
Calculation: Simple interest: Multiply the initial principal by the interest rate and the period of time. Compound interest: Apply the interest rate to the initial principal and the interest accumulated over time.
Usage: Useful for calculating interest on savings, loans, mortgages, bonds, and other forms of investment or financing.
Formula: Simple interest: Interest = Initial principal * Interest rate * Time. Compound interest: Final amount = Initial principal * (1 + Interest rate) ^ Time