Simple & Compound Interest: Complete Notes, Formulas, Examples, and Practice Questions
Simple & Compound Interest: Complete Notes, Formulas, Examples, and Practice Questions 1. Basic Formulas A. Simple Interest (SI) Definition: Interest calculated only on the original principal for the entire period. Formula: SI = P × R × T 100 SI = 100 P × R × T Where: P P = Principal (initial amount) R R = Rate of interest per annum (%) T T = Time (in years) Amount (A): A = P + S I A = P + S I B. Compound Interest (CI) Definition: Interest calculated on the principal plus all previously earned interest. Formula (compounded annually): A = P ( 1 + R 100 ) T A = P ( 1 + 100 R ) T CI = A − P CI = A − P Compounded n times per year: A = P ( 1 + R 100 n ) n T A = P ( 1 + 100 n R ) n T Compounded half-yearly: A = P ( 1 + R 200 ) 2 T A = P ( 1 + 200 R ) 2 T Compounded quarterly: A = P ( 1 + R 400 ) 4 T A = P ( 1 + 400 R ) 4 T Compounded monthly: A = P ( 1 + R 1200 ) 12 T A = P ( 1 + 1200 R ) 12 T 1 2 5 6 7 2. Difference Between SI and CI Feature Simple In...