## 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

Where

P= Principal

R- Rate of Interest (in %)

T = Time period.

### Examples:

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

**Solution:**

#### 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.

**Solution:**

## Compound Interest

### Definition

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

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?### Elaboration

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