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# TNPSC – SIMPLE INTEREST & COMPOUND INTEREST

## TNPSC – SIMPLE INTEREST & COMPOUND INTEREST

### SIMPLE INTEREST & COMPOUND INTEREST

Interest:

Basic terms associated with this topic:

Interest: It is the time value of money. It is the cost of using capital.

Principal: It is the borrowed amount.

Amount: It is the sum total of Interest and Pricipal.

Rate: It is the rate percent payable on the amount borrowed.

Period: It is the time for which the principal is borrowed.

Interest can be classified as: Simple interest: Simple interest is payable on principal.

Compound Interest: Compound Interest is payable on Amount.

#### Basic formulas related to Simple Interest:

==> Simple Interest (SI) =

Here P = Principal, R = rate per annum, T = time in years

Amount (A) = P + (PRT/100) = P [1+ (RT/100)] or P+SI

If time is given in months, & Rate is given per annum,

Then SI =

If time is given in weeks, & Rate is given per annum,

Then SI =

If time is given in days, & Rate is given per annum,

Then SI =

==> Also,

Rate =

Time =

Principal =

If amount is given then,

Principal =

#### Basic formulas related to Compound Interest:

If interest is compounded annually,

Amount =

If interest is compounded half yearly,

Amount =

If interest is compounded quarterly,

Amount =

If the rate of interest changes over the years, then

Amount =

Compound Interest for all the above cases = Amount – Principal.

Difference between C.I & S.I for two years =

Difference between CI & SI for three years =

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