1. What is the Interest Formula?

The simple interest formula calculates monthly interest for financial products in Philippine pesos. It's fundamental for understanding loan payments, savings growth, and investment returns.

2. How Does the Calculator Work?

The calculator uses the interest formula:

Where:

• \( P \) — Principal balance in PHP
• \( R \) — Monthly interest rate (annual rate divided by 12, as decimal)
• \( I \) — Monthly interest in PHP

Explanation: The formula multiplies the principal amount by the monthly interest rate to determine the interest accrued in one month.

3. Importance of Interest Calculation

Details: Understanding monthly interest helps in financial planning, comparing loan options, and projecting savings growth in the Philippine context.

4. Using the Calculator

Tips: Enter principal in PHP, annual interest rate in percentage. All values must be valid (principal > 0, rate > 0).

5. Frequently Asked Questions (FAQ)

Q1: Is this simple or compound interest?
A: This calculates simple monthly interest. For compound interest, the calculation would be different.

Q2: How do I convert annual rate to monthly?
A: Divide the annual rate by 12 (months) and convert from percentage to decimal (divide by 100).

Q3: What's a typical interest rate in the Philippines?
A: Rates vary by product (loans 5-20%, savings 0.1-4% annually), but always verify with your financial institution.

Q4: Why calculate monthly interest?
A: Most loans and savings in PH use monthly compounding, making monthly calculations most relevant.

Q5: Does this include taxes or fees?
A: No, this calculates gross interest. Actual amounts may be affected by withholding taxes or bank charges.