2. Calculate interest for one year
Next, calculate the interest charge for one year by multiplying the principal by the interest rate. In our example, that math would yield $5,000 x 0.07 = $350. This is the annual interest charge for the note.
3. Calculate interest for the entire period
Finally, to get the full cost, you need to multiply the annual charge by the number of years specified in the promissory note. In this case, the calculation would show $350 (charge for 1 year) x 3 (total years) = $1,050. Note that this total is 21% of the principal, equating to three 7% annual charges.