## Simple

Subtype of CompoundingThe earned interest amount should never be capitalized, which means the notional remains constant.

Formally, the interest amount

**earned during any time period with length**

*I***is given by the formula**

*t*

*I = Nrt*where:

**is the notional, which stays constant**

*N***is the applicable fixed rate**

*r***is the length of the accrual period in number of years according to some given DayCount convention.**

*t*