Work the setup, then the numbers
Simple interest
Convert months to a fraction of a year before multiplying principal and the annual rate.
- Simple interest
- $5,000.00
Follow the arithmetic
120,000 x 0.0625 x (8 / 12)
Intermediate values keep precision; dollar results display to cents.
The formula and its assumptions
Interest = principal x annual rate as a decimal x (months / 12)
This is simple interest on a constant principal balance. It does not calculate an amortizing payment. For day-based interest, use the day-count convention supplied in the question.
DRE Reference Book: real estate finance