Formula for Simple interest and compound interest

Formula for Simple interest and compound interest

• What is Formula for Simple interest and compound interest

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Simple interest and compound interest to know about...

Interest  –Whenever we  borrow a certain  sum of money (known  as the principal), we pay  back the original amount accompanied  with a certain amount of interest on  that amount. 

There is  a way, those  are the charges  of borrowing that sum  of money. Simple interest  is defined as one method of determining  the amount due to at the end of loan duration.   

Definitions of  Simple interest and compound interest Usual Words –

Principal  (P): The original  sum of money loaned/deposited.   

Interest  (I): interest is defined as The amount  of money that you pay to borrow or take something on loan or acquire money  or some of the amount of money that person earn on a deposit in the Time. 

Time  (T): Time is defined as The  duration for which the money  is borrowed or deposited for some duration or period. 

Rate of  Interest (R): Rate of interest is defined as The percent of interest  that you pay for money borrowed, or earn for money deposited 

Where nomenclature of some shot keywords :

 P: Principal  (original amount) R:  Rate of Interest (in %)

 T:  Time period  (yearly, half-yearly  etc.) Amount Due at the end of  the time period,  

A  = P {original amount } +  Simple interest or SI If you have a  close look, Simple Interest is nothing  else but an application of the concept of  percentages. 

Meaning of  Compound Interest  – 

in a compound interest  we mean when interest becomes  due after a certain period, then it  is added to the principal amount and interest  on succeeding years is based on the principal and  the interest added. It is the difference between the amount  and the original principal is called the compound interest. It  means to that in compound interest, the principal doesn’t remain  fixed at the original sum but increase at the end of each interest  period. Interest period is defined as the period at which the interest  becomes due or some of the period of loan to taken. It may be a year, half year  or quarter year as per requirement.

There is  following are  some of the methods  used to find or calculate compound  interest – 

1)  Simple  interest  method. 

2)  Interest  table method. 

3)  Decimal point  method. 

4)  Compound interest  formula method. 

5)  By Logarithm  method. 

ii) iii) iv) Calculated  yearly, half yearly, quarterly  or even monthly. It can be Changes  from year to year, and month to month or day to day etc. So this  is more than that of small interest or SI. 

1)  Simple Interest  Method – It also  is defined as When the  time of the interest is  not so long, i.e.; in simple way when  interest is calculated for only a few years  then we use this method. Just easy way to understand , It  is just similar to that used to find out simple interest. Some key important   

Follow  the steps  below – i) firstly to Calculate  interest on principal at the end  of every year. Then Add the interest  got in step (i) above to the original  principal. Above ans or this amount is principal for the next  year or so. Calculate or to find a compound interest by adding  each year’s in interest for entire duration or period. Then it can be subtract  the original from the compounded amount and this gives the compound interest.   

2)  here is some important Compound Interest  Formula Method – CI IS When the number  of years involved to then calculate or find a  compound interest are so many, for we can use the above method.  There is important formula used is – A = 1+ 00 Where P denotes = Principal  (original) n r A = number of years (interest period) = rate of interest , Amount  after n years.  


Questions arise during what is formula for simple interest and compound interest..and necessary questions from Google..

Frequently asked questions of simple interest and compound interest

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