How to Use
- Enter principal
Input the principal amount to deposit or invest.
- Enter rate and time
Input the annual interest rate (%) and time period (years or months).
- View results
See the total interest earned and the final maturity amount.
What is simple interest?
Simple interest is calculated only on the original principal. Because the interest earned each period is never added back to the principal, the amount earned in any given year stays exactly the same no matter how long the term runs. For example, if you deposit 10,000,000 won at 5% per year, you earn 500,000 won in the first year and the very same 500,000 won in the fifth year.
Where is it used?
- Lump-sum term deposits: products that pay all the interest once at maturity rather than reinvesting it along the way
- Some bonds and private loans: cases where a fixed rate applies for the agreed term
- Short-term cash management: trades of a year or less where the compounding effect is negligible
Its strength is a simple structure that makes returns easy to predict, but keep in mind that over longer terms the total return falls short of what compound interest would deliver.
The Formula
Simple interest is worked out in a single line.
Interest (I) = Principal (P) × Annual rate (r) × Time (t)
Total = Principal (P) + Interest (I)
Here P is the principal, r is the annual rate written as a decimal (5% → 0.05), and t is the number of years. Note that you must divide the percentage rate by 100 to convert it to a decimal rather than entering the percentage as is.
Worked Example
For a principal of 10,000,000 won at 5% per year over 3 years:
- Interest = 10,000,000 × 0.05 × 3 = 1,500,000 won
- Total = 10,000,000 + 1,500,000 = 11,500,000 won
- Monthly equivalent interest = 1,500,000 ÷ (3 × 12) = 41,667 won