Simple Interest (SI) & Compound Interest (CI) – Important Formulas
Numerical Aptitude Notes for CSAT Paper, SSC and Competitive Exams
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Principal – The money borrowed or lent out for a certain period is called the principal or the sum.
Interest – Extra money paid for using other’s money is called interest.
Simple Interest (S.I.) – If the interest on a sum borrowed for certain period is reckoned uniformly
Let Principal = P, Rate = R% per annum (p.a.) and Time = T years. Then
|
Simple Interest = |
P x R x T |
||
|
100 |
|
P = |
100 x S.I. |
; R = |
100 x S.I. |
; and T = |
100 x S.I. |
. |
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|
R x T |
P x T |
P x R |
Compound Interest – the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
Let Principal = P, Rate = R% per annum, Time = n
When interest is compound Annually:
|
Amount = P |
( |
1 + |
R |
) |
n |
|
100 |
When interest is compounded Half-yearly:
|
Amount = P |
( |
1 + |
(R/2) |
) |
2n |
|
100 |
When interest is compounded Quarterly:
|
Amount = P |
( |
1 + |
(R/4) |
) |
4n |
|
100 |
When Rates are different for different years, say r1%, r2%, r3% for 1st, 2ndand 3rd year respectively.
|
Then, Amount = P |
( |
1 + |
r1 |
)( |
1 + |
r2 |
)( |
1 + |
r3 |
) |
. |
||
|
100 |
100 |
100 |
Present worth of Rs. P due n years hence is given by:
|
Present Worth = |
P |
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