5.4 :  단리

Simple interest is a method for calculating the cost of borrowing money, or the return on investment, over a period of time.

Simple interest is calculated by multiplying the principal amount by the interest rate and the time period involved.

Simple interest remains constant throughout the investment or loan period and does not take into account any interest earned or charged in previous periods.

Meet Alex, who is trying to decide where to put one thousand dollars. He invested one thousand dollars in a Certificate of Deposit at an annual interest rate of five percent for three years.

The principal amount is the initial sum of money invested by Alex, which is one thousand dollars.

An investment of one thousand dollars would earn one hundred and fifty dollars in simple interest after three years.

Simple interest makes it easier to understand the cost of borrowing or the return on investments.

Simple interest is often used in short-term loans, savings accounts, certificates of deposit, government and corporate bonds, and Treasury Bills.