Calculate Simple Interest

Simple interest is principal × rate × time, so in Excel it’s just three cells multiplied together: =A2*B2*C2, where A2 is the principal, B2 the annual rate, and C2 the number of years.

With 1,000,000 at 7% for 5 years that returns 350,000 — 70,000 per year, since simple interest is calculated on the original principal every year and never on the interest already earned. That’s the difference from compound interest, where each year’s interest is added to the balance before the next calculation.

To get the total repayment amount, add the principal back: =A2+(A2*B2*C2), or use =A2*(1+B2*C2) in one step. Make sure the rate cell is formatted as a percentage — if you type 7 instead of 7%, the result comes out a hundred times too large. For a period in months rather than years, divide: =A2*B2*(C2/12).

To calculate simple interest in Excel, you need to use a simple formula. In this formula, you need to have the principal amount, interest rate, and term period of the interest and then you need to multiply all of these with each other to get the final interest amount in the result.

In the following example, we have values you can use to calculate the interest.

Steps to Calculate Simple Interest

First, in a cell enter a “=” sign.
Next, refer to the principal amount and enter an asterisk sign to multiply.
After that, refer to the interest rate (which should be in a percentage value).
Now, again enter an asterisk to multiply and refer to the term’s value.
In the end, hit enter to the simple interest value in the cell.

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So, the following is the formula, that we have used in this calculation.

To understand this formula and the interest returned by it. We need to split it into five parts as we have used five years as a term for the calculation.

As we are calculating simple interest each year in the term get an equal It returns 350000 in the result, which means 70000 per year as we have used 5 years. That means 350000/5 = 70000 per year.