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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.
==> 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,
If time is given in days, & Rate is given per annum,
==> Also,
Rate =
Time =
Principal =
If amount is given then,
If interest is compounded annually,
Amount =
If interest is compounded half yearly,
If interest is compounded quarterly,
If the rate of interest changes over the years, then
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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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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