Hi, my name's Grant Hobson, I've been a finance analyst for the last six years, and today I'm going to run through some financial performance methods as well as some investment appraisal techniques. How to calculate simple interest. I'm going to run through several ways we can use the formula: I = PRT to calculate interest amounts that were paying on investments, on interest that we're earning on investments. In the formula, P stands for the principle amount, R stands for your rate of interest, and T stands for your time period. So in the first example, I'm going to calculate the interest, knowing the principal, the rate and the time, we can calculate the interest as follows: if we have £6,000 to invest, this is your principle, the rate of interest that we generate on this is 9.5%, which is R, and we're going to invest this for 8 years, which is T. Now using the formula, we can calculate the interest as follows: it equals, your principle times by your interest rate, times by the 8 years, makes £4,560.00. A second example, when trying to determine the total amount of interest earned, that would be if we add £9,000.00, we earned 3.25% interest per year, but this was only for three years, so the interest amount here would only be £877.50. There maybe occasions where by we want to calculate the interest and it's only for a specific number of days and it doesn't have a full year time period, so the method for doing this is rather than times T=3. For example, if we only generated interest for 150 days in the year, the time period would then become 150 divided by 365, because it's only a portion of the year, which would mean that we only generate interest of £120.00.

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