There are several ways in which interest is calculated and paid. The simplest of the methods used is called simple interest.
The formula for this is \[S=P\times \mathit{r}\times \mathit{t}\:\Longrightarrow {Formula}\:\mathit{1}\]
where
\[S = Simple\: Interest\]
\[P = Principle\: /Present\: Value\]
\[\mathit{ r}\ = Interest\: rate\]
\[\mathit{t}\ = period\]
Let us consider an example of an investment on simple interest terms of $1000 invested for 3 years at 10% per annum (p.a.).
Using Formula 1 and substituting the values,
\begin{equation} \label{eq1}
\begin{split}
S & =\mathit{ 1000}\times \mathit{0.1}\times \mathit{3}\\
& = \mathit{300}
\end{split}
\end{equation}
The simple interest after 3 years is $300.
Thus the total you will have after 3 years if you have invested $1000 with a 10% interest/return rate id $1300, which is the principal plus interest .
We can write this as
F = P + S
F = P +Prt
F= P(1 +rt)
Where F is the Future Value of an investment.
