# How do you calculate the simple interest you would receive in one year on a savings account that earns 5% annual interest. Your beginning balance is $255?

##### 1 Answer

Oct 26, 2016

#### Explanation:

You need to use the correct formula to calculate simple interest.

P= principal (starting amount)

R= rate of interest as a % - hence the '100'

T = time period, given in years

SI = simple interest.

Now just substitute in the given values and calculate.