Simple interest and
Compound interest
GENERAL ARITHMETIC
Simple interest and Compound interest
Interest and Compound interest
Interest Compound interest
Simple interest is defined as the Compound interest occurs when
amount paid back for borrowing the total principal amount
money over a set period of time. exceeds the due date for
payment, as well as the rate of
interest, over a period of time.
The principal amount is Throughout the borrowing
constant period, the principal amount
fluctuates
The interest is calculated on the It is charged interest on both
principal amount the principal and the
accumulated interest.
Principal × Rate × Time Compound Interest = Principal (1 + Rate)Time - Prinicipal
Interest =
100
Principal The some of money which we borrow from banks or
institutions is termed as principal
Rate of This is the rate on which the extra money what we pay for
interest keeping or using of money is calculated. It is in percent form.
e.g. 20% rate of interest means for every hundred rupees, we
have to pay ₹ 20 each year.
Amount Total money what we return to the bank after end of period is
called amount. In other words, amount is the sum of principal
and interest accrued on principal.
i.e. Amount = Principal + Interest
Time The period for which the money is lent or deposited or
borrowed, is called time. There are two ways of calculating
interest
1. Simple interest 2. Compound interest
Practice Questions
Question: Namita borrowed Rs 50,000 for 3 years at the
rate of 3.5% per annum. Find the interest accumulated at
the end of 3 years.
Solution:
70% of 800 = 70/10×800 = 70×800/100
X = 56000/100 = 560
Question: Find the amount if Rs. 10,000 is invested at 10%
p.a. for 2 years when compounded annually.
Solution:
P=10,000, R=10%, n=2 years
2
10
CI = 10000 1+
100
CI = 10000 (1+0.1) =10000(1.1)2
2
CI = 10000(1.21) = 12100
Question: How much time will it take for an amount of Rs.
450 to yield Rs. 81 as interest at 4.5% per annum of
simple interest
Solution: 100 × 81
Time = years
450 × 4.5
Time = 4 years
Question: Mohan lent some amount of money at 9%
simple interest and an equal amount of money at 10%
simple interest each for two years. If his total interest was
Rs. 760, what amount was lent in each case
Solution: P×2 (9+10) = 760
100
2×19P
= 760
100
760×100
P= = 2000
2×19
Question: The compound interest on a sum of money at
5% per annum for 3 years is Rs. 2522. What would be the
simple interest on this sum at the same rate and for
the same period
Solution:
5 3
2522 + P = P(1+ )
100
9261P
=
8000
P = 16000
16000 × 5 × 2
SI =
100
SI = 2400
Question: Amit borrowed Rs. 20,000 from his friend at
15% per annum simple interest he lent it to Tarun at the
same but rate compounded annually. Find his gain
after 2 years
Solution:
15 20000×15×1
Gain = × =15×15×2=450
100 100
Question: A sum of money doubles itself at compound
interest in 5 years. In how many years will it become
eight times
Solution:
5 5
R R 2P
P 1+ =2P = 1+ 100 = P =2 -(i)
100
n
R
Let P 1+ = 8P
100
3
R
n
3 R
5
1+ 100 = 8 = 2 = 1+ 100
n 15
R R
1+ 100 = 1+ 100
n = 15