04:40
SIMPLE AND COMPOUND INTEREST
This topic most relevant to your life for banking
Principal: P The amount Deposit in a bank OR the loan taken from a person/bank
Interest: I The amount Charged of holding principle for some period
Interest rate: R Some % of Amount from principal
Time: N How long the principal is hold
Amount A = I+P
Simple (SI) : Interest(The amount given by the principle holder for certain period)
Eg: 1000 is given for 10% interest rate for 3 year of time
then the interest is 1000+(10% of 1000)*3 = 1000+(100*3) = 1300
1000 Principal+300 interest=Total Amount
Compound (CI) : Interest( The amount given by the principle holder for certain period ,
The principal was change periodically)
Eg: 1000 is given for 10% interest rate for 3 year of time
then the interest is 1000+200=1200 for first year
Now the principal changed to 1200 So 1200+120=1320 for the second year
Now the principal changed to 1320 So 1320+132=1622
1000 Principal + 622 Interest= Total Amount
FORMULA:
SI:
SI=(P*N*R)/100
A=P+SI
A=P(1+(N.R/100)
CI:
CI=(P((1+R)/100)^N)-P
=((P((1+R)/100)^N)-1)
Total Amount=P+CI
P(1+(R/100))^N
QUESTION AND ANSWER
The simple interest on a certain some of money at the rate of 5%p.a.
For 8 years is Rs.840.at what rate of interest can be received on the same sum after 5 years?
SI=840/8=one year interest=15
8*5%=40%
40%=840
1%=21
100%=2100
In what % the 2100 Interest become the same 840 in 5 Year time
5(2100*(x/100))=840
5*21x=840
21x=168
x=168/21
x=8%
TRICK(COMPOUND INTEREST)
CI=for 2 years (A+B)+A.B/100
Eg:
5% For 2 year=5+5=10
10+(25/100)
10.25
Eg:
CI=5% for 3 year=(A+B)+A.B/100
5% For 2 year =5+5=10
10+(25/100)
10.25
For next year A=10.25 B=5
10.25+5=15.25+((10.25*5)/100)
=15.25+(50+1.25)/100
15.25+(51.25/100)
15.25+.5125
15.7625%
