Question

explain the compound interest with example

Answer 1

When the interest is counted with the Principal changing every time unlike simple interest where for every year/month the Principal is the same i.e. The Principal u took in the starting.
Ex-while calculating the compound interest of say $10 for 2 years at the rate of 10%per annum we take the principal as $10 for the first year and then we take the amount after 1 year as the principal for calculating the interest of the 2nd year.
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Answer 2

We know that when money is borrowed on simple interest, the interest is calculated formly on the actual principal throughout the loan period.But the banks,post offices etc, use different method of computing interest. In this method the borrower and lender agree to fix up a certain time interval,say 1 year or half I year or 1 quarter for the computation of interest and amount.
The difference between machine the amount at the end of the last period and the original principal is called the compound interest (C.I.)

Direct formula of compound interest:-
P{[1+r/100]n -1}