How do you calculate interest?
submitted by Walter Seznick

scooter

You take the amount of money you start with (the principal), then multiply it by the interest rate, and then multiply that by how long you're earning interest. If you have $500 at 10% yearly interest for half a year, it's $500 x 0.10 x 0.5 = $25 interest.

savannah

Start with your principal. That's the amount you started with. Multiply that by the interest rate.

If you started with $200, and you have a 4% interest rate, you'd do $200 x 0.04 = $8. If you're talking about a savings account, that's calculated annually, so that $200 in the bank will make $8. If you want to see your monthly interest income, you can divide the total yearly interest by 12, which is less than a dollar because savings accounts aren't what they used to be.