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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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