SIMPLE INTEREST is a math concept that has little practical application.
Interest = Principal x Rate x Time.

The idea is to use Multiple Variables for solving a problem.
The concept is that if you borrow (or lend) money (PRINCIPAL), there is a fee (INTEREST) that will be paid back after a certain period of time.  The fee is often expressed as a ANNUAL RATE (Percent), and TIME is in years.

It is "unrealistic" in that is assumes the Interest and the Principal will be paid back at some future date.
People usually want to make sure they will get repaid, so real loans are paid back over the life of the loan (Regular Payments).

You usually convert the RATE (given as a percent) to a decimal.  
Since the Rate is usually expressed in Annual Terms, you need to make sure the term is also in Annual terms (Ie: 18 months = 1.5 years)

Sometimes you will be asked for the TOTAL amount to be repaid at the end of the term.
You can often use the UNIT Rate or annual rate to quickly calculate the total.
In some cases, you are given the Amount of the interest (I) and asked to find either the Rate or  Time.

Revised: April 29, 2024