There are several ways in which interest is calculated and paid. The simplest of the methods used is called **simple interest**.

where

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.