Monthly Interest Calculator

What is Monthly Interest?

Monthly interest is the amount of interest earned or charged on a principal amount over a period of one month. It's commonly used in savings accounts, loans, and other financial products where interest is calculated and applied on a monthly basis.

The Monthly Interest Formula

The formula for calculating monthly interest is:

\[A = P(1 + \frac{r}{12})^n\]

Where:

• \(A\) = Final amount
• \(P\) = Principal amount
• \(r\) = Annual interest rate (in decimal form)
• \(n\) = Number of months

Step-by-Step Monthly Interest Calculation

1. Identify the principal amount (P), annual interest rate (r), and number of months (n).
2. Convert the annual interest rate to a monthly rate by dividing by 12.
3. Convert the monthly rate to decimal form (divide by 100).
4. Plug these values into the monthly interest formula.
5. Calculate the final amount (A).
6. Subtract the principal from the final amount to get the interest earned.

Example Calculation

Let's calculate the monthly interest for a principal of $1,000, an annual interest rate of 6%, over 6 months:

1. \(P = \$1,000\), \(r = 6\% = 0.06\), \(n = 6\) months
2. Monthly rate = \(0.06 \div 12 = 0.005\) or 0.5%
3. \(A = 1000(1 + 0.005)^6 = \$1,030.38\)
4. Interest earned = \$1,030.38 - \$1,000 = \$30.38

Visual Representation

The green portion represents the principal ($1000), and the blue portion represents the monthly interest earned ($30.38).