Simple Interest

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Simple interest is the amount of interest earned on the original amount of money invested. Simple interest is paid out as it is earned and does not become part of an account’s interest-bearing balance. The invested amount is called principal. Let’s say you invest $5,000 (the principal) at an annualised interest rate of 7.5 percent. Multiplying the principal by the interest rate gives you an interest payment of $375. This is your simple interest. At, investors are paid their interest monthly. In this example you would receive $31.25 per month on your $5,000 investment.

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