Simple interest is calculated in this way: A. It is calculated on the principal amount of the loan.
Simple interest is the type of interest that does not compound and is calculated on the principal portion of a loan.
The formula for computing simple interest is Principal x APR x Number of years.
For example, the simple interest of $100,000 at 2% APR for 2 years is $4,000.
Thus, simple interest is calculated in this way: A. It is calculated on the principal amount of the loan.
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