Simple interest is a method used to calculate the interest earned or paid on a principal amount over a specific period. It is determined using the formula: Interest = Principal × Rate × Time. Here, the principal is the initial amount of money, the rate is the percentage of interest per year, and time is the duration in years. This type of interest is straightforward because it does not compound, meaning the interest is only calculated on the original principal. For example, if you invest $1,000 at a 5% annual interest rate for 3 years, you would earn $150 in simple interest, making the total amount $1,150.