How is simple interest calculated on a loan?

The correct method for calculating simple interest on a loan is to multiply the loan amount by the interest rate and then by the time period for which the loan is taken. The formula is typically expressed as:

Simple Interest = Principal (Loan Amount) x Interest Rate x Time

In this context, the loan amount refers to the principal or the initial sum of money borrowed. The interest rate is the percentage charged on the principal for borrowing that money, and the time period reflects how long the money is borrowed, usually expressed in years.

While the other formula options might incorporate elements of interest calculations, they either miss key components or mix concepts associated with compound interest or total loan amounts incorrectly. The focus of simple interest is solely on the initial amount, the rate of interest, and the time, without compounding or adding previous interest. This means that option A succinctly captures the essence of calculating simple interest.