## Example 1 – Calculating Simple Interest to be Paid by an Individual with Formula

**Problem:** Chris has taken a loan of $1,000,000 with a yearly interest rate of 6% for 5 years. Now calculate the simple interest Chris paid at the tenure’s end.

**Solution:**

The principal amount is $1,000,000

The yearly Interest rate is 6%

The time period is 5 years

To calculate simple interest in Excel, we have created a data table with two columns. The first column holds properties such as principal amount, interest rate, time period, etc.

The second column, Value, contains the corresponding values for each property specified in the Properties column.

At the end of the data table, we’ve created another row to show the simple interest value.

**Steps**:

- Select cell
**C10** - Enter the following formula into the cell:

`=C7*C8*C9`

Where **C7** contains the principal amount, **C8** contains the yearly interest rate, and **C9** contains the total period of time.

- Press the
**ENTER**button to execute the simple interest formula.

After hitting the **ENTER** button, we see the simple interest amount is $300,000.

## Example 2 – Applying Formula to Estimate Simple Interest of a Company after a Certain Period

**Problem:** XYZ Corporation has issued a 10-year loan of $50,000,000 from ABC Bank at an annual interest rate of 5%. Find out the total amount of simple interest that needs to be paid back to ABC Bank after 10 years.

**Solution:**

The principal amount is $50,000,000

The Interest rate per year is 5%

The tenure is 10 years

To calculate the simple interest rate using this information,

**Steps**:

- Enter the following simple interest formula in cell
**C10:**

`=C7*C8*C9`

- Press
**ENTER**to get the simple interest amount.

From the result of the simple interest formula, we can see that the total amount of the simple interest rate is $22,500,000. This amount of simple interest will pay back the XYZ Corporation to the ABC bank after 10 years of time.

## Example 3 -Evaluating Total Amount to be Paid by a Company for a Certain Amount of Loan

**Problem:** X Industries Ltd. has borrowed an amount of $5,000,000 for 7 years with an annual interest rate of 12%. Now calculate the simple interest that X Industries Ltd. has to pay back at the end of the tenure. Also, calculate the total accrued money.

**Solution:**

The principal amount is $5,000,000

The yearly Interest rate is 12%

The tenure is 7 years

To calculate the simple interest in Excel,

**Steps**:

- Enter the following simple interest formula in cell
**C11:**

`=C7*C8*C9`

We will get the formula result in Cell **C11**.

Cell **C8** contains the principal amount of $5,000,000 throughout the simple interest formula. **Cell C9 **contains the yearly interest rate, which is **1****2%, **and lastly, cell **C10** contains the tenure, which is 7 years.

- Press
**ENTER**.

The simple interest amount is $4,200,000 after 7 years of tenure.

To calculate the total amount of money that needs to pay back,

- Enter the following formula within cell
**C12**.

`=C8*(1+C9*C10)`

- To execute the formula, press
**ENTER**.

After pressing the **ENTER** button, we can see that the total accrued money amount is $9,200,000.

## Application of Simple Interest (SI)

- The simple interest formula is largely used by banks to provide savings bank account services.
- Short-term loans such as car loans, certificates of deposits and savings accounts, term deposits, etc., use the simple interest formula immensely.

## Things to Remember

While calculating the simple interest using the formula in Excel, you don’t need to worry about the yearly interest rate in percentage. Because Microsoft Excel can calculate directly with percentage values.

**Download the Practice Workbook**

You can download the Excel file and practice.

**How to Apply Simple Interest Formula in Excel: Knowledge Hub**

- How to Calculate Simple Interest on Reducing Balance in Excel
- Convert Compound Interest to Simple Interest in Excel
- How to Calculate Simple Interest Loan Payments in Excel
- How to Calculate Daily Simple Interest in Excel
- How to Calculate Simple Interest and Compound Interest in Excel

**<< Go Back to ****Excel for Finance**** | ****Learn Excel**

Perhaps a good example to include would be simple interest with annual payments. Ex: I owe $50,000, and I make a $5,000 payment every year – how much is owed after 10 years?

Thanks,

ChrisP

Hello CHRISP,

Thank you for your question, we have included a screenshot of the results and you can find the Excel file linked below.

Calculating Simple interest.xlsx

Regards,

ExcelDemy