How to calculate interest rate per annum

Written by linda batey
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How to calculate interest rate per annum
Calculating the interest rate per annum isn't that difficult (Jupiterimages/BananaStock/Getty Images)

Calculating the interest rate per annum isn't that difficult if you know three things: the principal amount; the interest rate; and the time period in years. Knowing the equation for figuring per-annum interest will help you know what the interest rate will be on a loan of any size before you sign on the dotted line.

Skill level:
Moderately Easy

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Things you need

  • Calculator

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Instructions

  1. 1

    Multiply the principal by the rate of interest. For example, using £5,525 as the amount of principal and .0325 as the rate of interest, the calculator will display 276.25.

  2. 2

    Multiply that figure by the time. In this example, use two years. The calculator will display 552.50. This is the total interest that will be charged on the loan.

  3. 3

    To figure the monthly interest, divide £359.1 by 24 months.

Tips and warnings

  • Remember the equation P x R x T (principal times rate times time).

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