Simple Interest

Simple Interest is the interest calculated only on the principal amount for a specific period at a fixed rate of interest.

Formula:
SI = (P × R × T) / 100

Where:

• SI = Simple Interest

• P = Principal (Initial amount)

• R = Rate of interest (per annum)

• T = Time (in years)

Example:
Find the Simple Interest on ₹5,000 at 10% for 2 years.

SI = (5000 × 10 × 2) / 100
SI = 1000

So, the Simple Interest = ₹1000

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Compound Interest

Compound Interest is the interest calculated on both the principal and the interest accumulated over previous periods.

When Compounded Annually:

Amount (A) =
P × (1 + R/100)ᵀ

Compound Interest (CI) =
A − P
= P × (1 + R/100)ᵀ − P

Where:

• P = Principal

• R = Rate of interest per annum

• T = Time in years

• A = Final amount

• CI = Compound Interest

Example:

Q: Find the Compound Interest on ₹10,000 at 10% per annum for 2 years.

Solution:
A = 10000 × (1 + 10/100)²
A = 10000 × (1.1)²
A = 10000 × 1.21
A = ₹12,100

CI = 12,100 − 10,000 = ₹2,100