What is the formula used to calculate interest?

The formula to calculate interest is indeed principal times rate times time, which is commonly expressed as Interest = Principal × Rate × Time. This formula is fundamental in finance and is used to determine the amount of interest earned on an investment or paid on a loan over a specified period.

In this context, 'principal' refers to the initial amount of money deposited or borrowed, 'rate' is the annual interest rate expressed as a decimal, and 'time' is typically measured in years. By multiplying these three variables together, you can derive the total amount of interest that will accrue over the designated time frame.

This formula applies to simple interest calculations, which are straightforward and do not involve compounding. Understanding this formula is essential for making informed financial decisions, whether in personal finance, investments, or business operations.