Calculation of Simple Interest and Compound Interest for JAIIB

Calculation of Simple Interest and Compound Interest for JAIIB

Simple Interest Definition

Principals (P):

The original Sum of Money Loaned/deposited.

Interest (I):

The amount of money that you pay to borrow money or the amount of money that you earn on a deposit

Time (T):

The duration for which the money is borrowed/deposited.

Rate of Interest (R):

the percent of interest that you pay for money borrowed, or earn for money deposited.

Formula for Calculating S.I

P= Principal
R- Rate of Interest (in %)
T = Time period.


Question. What is the S.I on 7500/- at the rate of 10% per annum for 6 years


Question 2. A man borrowed Rs 15000/- at the rate 24% S.I and clear debt after 6 years, how much Rs. has to return.


Compound Interest


Internal calculation on initial principal and also on the accumulated interest of previous periods of deposit or loan


Formula for calculation of compound interest

For Example:

A took three years loan of Rs. 10000 at an interest rate of 5% that compound annually. What would be the compound interest?


Year Opening Balance(P) Interest (I) 5% Closing Balance (P+I)
1. 10000 500 10,500.00
2. 10500 525 11025
3. 11025 551 11576

Compound Interest Payment can be made

  • Monthly = 12
  • Quarterly = 4
  • Semi- annually= 2
  • Annually = 1.

(It means I should be divided by no. of time it is compounded)

For Example:

Ram invested Rs. 2000 for 2 years at the rate of 5% that is compounded annually. What will be C.I?

Taking the same example compounded Monthly

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