What is the correct formula for calculating simple interest?

The formula for calculating simple interest is derived from the fundamental relationship between the principal amount, the interest rate, and the time period. The correct formula, SI = P x I x N, clearly shows how interest accrues over time.

In this formula, SI represents the simple interest earned; P is the principal amount (the initial sum of money); I is the interest rate (expressed as a decimal); and N is the time period (usually in years).

By multiplying the principal amount by the interest rate and the time period, you directly calculate the total interest earned on that principal over the specified duration. This formulation reflects the linear nature of simple interest, as it does not take compounding into account, unlike other forms of interest calculation.

To clarify why the other options don’t represent the correct calculation: the option stating SI = P + (P x I x N) combines the principal and the interest accrued, which is not solely focusing on the interest itself. The option suggesting SI = (P + I) x N incorrectly assumes that interest is to be added to the principal before multiplying by the time period, which does not apply to simple interest calculations. Lastly, SI = P / (I x N) incorrectly sets up an equation