Question

Write the simple interest and compound interest formula with examples.

Answer 1

simple interest= P×R×T / 100

compound interest = Amount - Principal

Answer 2

Simple Interest: Simple interest is when the interest is calculated only on the amount invested initially or loaned.  

Formula:

S.I=P×R×T

where, SI is simple interest, P is the principal, R is the rate and T is the time in years.

E.g.  

If a 2-year loan of Rs 500 is made at 4% interest then  

Simple Interest=500× 0.04×2  

                            = 40  

Compound Interest: Here the interest is added back to the principal sum so that the interest is earned during the next compounding year.

A= $P(\frac{1+r}{n})^{nt}$  

E.g.:  

If amount of Rs 5000 is deposited in savings at a rate of 5% compounded monthly, the investment after  

10 years will be =

A= $5000(1+\frac{0.05}{12})^{120}$ = Rs 8235.05

Where P=5000,  R=$\frac{5}{100}$,  n=12,  t=10