Simple Interest  & Compound Interest

A clear understanding of percentage calculations is a prerequisite to solve the problems in interest. The solved example of this chapter will help you in different dimensions, This chapter finds its varied application in solving data interpretation problems.When a sum of money is lent by x to y, then x is called the lender or creditor and y is called the debtor or borrower. The money borrowed is called Principal or Sum.Extra money paid for using other’s money is called Interest.Total money paid in the end is the sum of Principal & Interest and is known as Amount.Growth of money can be simple or compound.


Simple Interest:

If the interest on certain sum for a certain period is reckoned uniformly, it is called Simple Interest (SI)
At simple rate the simple interest is proportional to the time.
There is no interest on interest.
The interest is calculated on the initial sum.
The amounts are in AP if time is same.
Let Principal = P, Rate = R% and time = T years. Then
S.I. =
P =
T =
R =

Compound Interest:

Interest which is calculated on the initial principal well as the interest accumulated over previous periods is called Compound interest (C.I.)The amount at the end of certain year becomes the principal for the next time period.At Compound rate there is interest on interest.The ratio between the amounts at compound rate is same if the time is same.
The amounts at compound rate are in G.P. if time is same.

Let Principal = P, Rate = R% and Time = n years. Then

1.When interest is compounded Annually:
In this case, Amount =

2.When interest is compounded Half Yearly:
In this case, Amount =

3. When interest is compounded Quarterly:
In this case, Amount =

4. When Time is Fraction of a Year:
Let the time be a fraction of a year, say years
Then Amount =

5. When interest is compounded continuously, Amount = P{e(rt/100)}

6. When Rates are different for different years, say R1, R2, R3, percent for 1st, 2nd and 3rd year respectively:
In this case, Amount =

Under Compound Interest, the interest is added to the principal at the end of each period to arrive at the new principal for the next period.In other words, the amount at the end of first year (or period) will become the principal for the second year (or period); the amount at the end of second year (or period) becomes the principal for the third year (or period) and so on.
If P denotes the principal at the beginning of Period 1, then principal at the beginning of Period 2
= PR = Amount at the end of Period 1 P at the beginning of Period 2
= PR2 = Amount the end of Period 2 P at the beginning of Period (n + 1)
= = PR2
= Amount at the end of period n
Where R =
Hence the amount after n years (periods) = PRn = A
Interest = I = A - P = P [Rn - 1]

Example 1.Calculate the simple interest on Rs7200 for 4 years at 6.25% p.a. rate.
Solution : Simple Interest = 25% of 7200 = Rs. 1800

Example 2 Rate is 10% p.a., Time is 4 years, What is the simple Interest on a loan of Rs. 1000.
Solution: Simple Interest = 40% of Rs. 1000 = Rs 400

Example 3 A sum becomes 2.6 times in 8 years at simple rate. Find the rate.
Solution:The Rate is x 100 = 20%, because the rate is the interest on Rs. 100 in one year.

Example 4. A sum becomes 3 times in 8 years at simple rate. When does it become 5 times?
Solution: Let the P = Rs. 1
S 1 is Rs. 2 in 8 years
S 1 is Rs. 4 in 16 years [When SI = Rs. 4, A = Rs. 5 hence 5 times]
Ans = 16 years

Example 5. What sum amounts to Rs 6400 in 4 years at 3.75% p.a. simple rate.
Solution: Amount after 4 years = (100 + 4 x 3.75)% of Principal
6400 = x Principal
Principal = Rs x 100 = Rs. 5565.25
Alternate Method: Use direct formulae P = (100 x A)/(100 + RT)

Example 6. A sum becomes Rs. 1200 after 2 years & Rs. 1320 after 3 years at simple rate. Find the rate.
Solution: P = 1200, t = 1 year
SI = A - P 1320 - 1200 = 120
Rate = (100 x 120)/(1200) = 10%

Example 7.Simple interest of 2 years = Rs. 600. Find the compound interest on the same sum at 20% p.a. rate.
Solution:C.I. of 2 year = Rs. 600 + 20% of Rs. 300 [Rs. 300 is S.I. in 1 year]
Rs 660

Example 8 .What sum amounts to Rs. 9261 in 3 years at 5% p.a. compound interest.
Solution:= 9261
P = Rs. 8000

Example 9 .A sum becomes times in 2 years at compound rate. Find the rate.
Solution:Since the sum becomes 25/4 times after 2 years.
If becomes = 5/4 after 1 year
Rate = = 25%

Example 10.For how many years should Rs. 600 be invested at 10% per annum in order to earn the same simple interest as earned by investing Rs. 800 at 12% per annum for 5 years?
Solution:Simple Interest = Rs. = Rs. 480
Time = = 8 years

Want to Know More
Please fill in the details below:


Recent Law Posts$type=three$c=3$author=hide$comment=hide$rm=hide$date=hide$snippet=hide

Recent Management Posts$type=three$c=3$author=hide$comment=hide$date=hide$rm=hide$snippet=hide

Recent HM Posts$type=three$c=3$author=hide$comment=hide$date=hide$rm=hide$snippet=hide


Abetment,1,Absolute Liability,1,Admit Card,12,admit-card,1,Agency,1,AIBE,2,AILET,4,AILET 2020 Admission,1,AILET Exam,2,AILET Mock Test,1,Alphabetical Series,3,AMU Application Forms 2022,1,Anagrams,1,Analogies,3,Answer Key,2,answer-key,6,aptitude test preparation for BBA.,1,Attempt,1,Average,1,BA entrance exam 2019. BBA coaching classes in Delhi,1,BA-LLB,2,Bailment,1,BBA,1,BBA Aptitude Test,1,BBA Coaching Ghaziabad,1,BBA entrance exam,2,BBA entrance exam preparation,1,BBA entrance exams,1,BBA entrance in Delhi,1,BBA exam,4,BBA exam crash course,1,BBA merit list 2019,1,BBA Mock Test,1,BBA Study Books,1,BBA Study Material,1,BHU LLB 2019,1,BHU LLB 2020 Application Form,1,BHU-LLB,3,Blood Relation,2,Breach of Contract,1,Capacity of Parties,1,Cheating,1,Clat,8,CLAT 2019 Analysis,1,Clat admission,1,CLAT Coaching,2,CLAT Coaching Delhi,1,CLAT coaching in Noida,1,CLAT Entrance Exam,2,CLAT Entrance Test,1,CLAT Exam,3,CLAT Exam Pattern,2,CLAT Mock Test,1,CLAT Preparation,1,CLAT previous year question paper,1,CLAT Study Material,1,CLAT-GK,1,Clock Calendar,4,Cloze Test,7,Coding Decoding,3,Compound Interest,1,Consideration,1,Contract,12,Contract-LA,8,Criminal Breach of Trust,1,Criminal Conspiracy,1,cut off,5,cut-off,3,Dacoity,1,Dangerous Premises,1,Data Interpretation,1,Defamation,1,Dice Test,1,Direction Sense Test,2,DU LLB 2017,1,DU LLB Brochure,1,DU LLB Coaching,1,DU LLB Entrence,2,DU LLB Exam,6,DU LLB exam Coaching,1,DU-LLB,3,English,25,Exam,3,Exam Pattern,5,Extortion,1,featured-articles,1,Free Consent,1,General Defenses,1,General Exceptions,1,Geometry,1,Grammar,2,Height Distance,1,Hotel Management,148,Hotel Management Coaching in Delhi,1,Hotel Management Coaching,1,Hotel Management Colleges,1,Hotel Management Entrance Exam,3,How to Become a Chef,1,how to crack CLAT,1,how to crack CLAT with coaching.,1,how to prepare for BBA 2019?,1,Idioms,3,IHM,23,IHM Exam 2018,1,IHM BOOK,1,IHM Exam Syllabus,1,IHM in Ahmedabad,1,IHM in Bangalore,1,IHM in Bhopal,1,IHM in Bhubaneswar,1,IHM in Chandigarh,1,IHM in Chennai,1,IHM in Goa,1,IHM in Gurdaspur,1,IHM in Guwahati,1,IHM in Gwalior,1,IHM in Hajipur,1,IHM in Hyderabad,1,IHM in Jaipur,1,IHM in Kolkata,1,IHM in Lucknow,1,IHM in Shimla,1,IHM in Srinagar,1,IHM in Trivandrum,1,Indian Partnership Act 1932,1,IPC,11,IPC-LA,7,IPMAT 2020,2,IPU CET,1,IPU CET application forms,1,IPU CET Exam,2,IPU LLB Exam,1,JMI-BA.LLB,2,Jumbled Sentences,2,Latest articles,257,Latest News,15,Law,328,Law of Torts,1,Law Study Material,1,law-B.com,1,Law-Entrances,1,Legal Aptitude,60,Liability of Owner,1,LLB-Colleges,1,LLB-LLM,1,LLB-LLM BHU,1,LSAT Exam,1,LSAT Exam Coaching,1,MAH CET 2020,1,Management,114,Mensuration,1,Mixture Allegation,1,NCHM JEE 2017,1,NCHM JEE Cutoff 2017,1,NCHMCT,6,NCHMCT application form 2020,2,NCHMCT Coaching,1,NCHMCT Courses Class 12th Students,1,NCHMCT Exam,3,NCHMCT Exam Pattern,2,NCHMCT in Mumbai,1,NCHMCT JEE,2,NCHMCT JEE coaching,1,NCHMCT JEE Entrance,1,NCHMCT Registration,1,Negligence,1,Nervous Shock,1,New CLAT Pattern,1,news,2,Notification,1,Nuisance,1,Number Puzzle,2,Number Series,3,Number System,1,Offences against Human Life,1,Offences Documents,1,Offences Marriage,1,Offer Acceptance,1,Others,39,Partnership,1,Percentage,1,Permutation Combination,1,Probability,1,Profit Loss,1,Progression,1,Quant,17,Quantitative Aptitude,17,Quasi Contracts,1,Quiz,68,QZ-1 LA,1,Ratio Proportion,1,Reasoning,28,Results,13,Robbery,1,Seating Arrangement,3,Sedition,1,SET 2020 Application Form,1,SET 2020 Application Forms,1,SET 2020 Important dates,1,SET Entrance Exam,2,Simple Interest,1,Spelling,3,Strict Liability,1,Study Notes,64,Success Stories,1,syllabus,6,Syllogism,2,Theft,1,Time Speed Distance,1,Tips & Strategy,13,Tips and Strategy,2,Tort,12,Tort-LA,11,Trespass to Goods and Conversion,1,University for Clat,1,Venn Diagram,3,Verbal Ability,24,Vicarious Liability,1,Vicarious Liability of State,1,Vocabulary,3,Void Agreements,1,Void Contract,1,Work Pipe Cistern,1,
ClearExam: Best CLAT Coaching in Delhi | Best CLAT Coaching Center | CLAT Online Coaching: quant-simple-compound-interest-theory-part1
ClearExam: Best CLAT Coaching in Delhi | Best CLAT Coaching Center | CLAT Online Coaching
Loaded All Posts Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy