Interest always calculated on the original amount, without adding the interest already earned. Common in short-term loans and some deposits that pay interest at maturity.
An example
€10,000 at 5% simple interest for 3 years earns €1,500 (€500 each year).
Learn more
- What changes if you contribute at the start of the month?
- How much of the final balance did you put in?
- What does one point of annual fees cost over the long run?