CAT Exam > CAT Videos > Crash Course for XAT > Simple & Compound Interest
Simple & Compound Interest Video Lecture | Crash Course for XAT - CAT
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FAQs on Simple & Compound Interest Video Lecture - Crash Course for XAT - CAT
| 1. What is the difference between simple interest and compound interest? |  |
Ans. Simple interest is calculated only on the original principal amount, while compound interest is calculated on both the principal amount and any accumulated interest. In simple interest, the interest remains constant throughout the entire duration, while in compound interest, the interest is added to the principal at regular intervals, leading to a higher total interest amount.
| 2. How can I calculate simple interest? | |
Ans. To calculate simple interest, you need to know the principal amount, the interest rate, and the time period. The formula for calculating simple interest is: Simple Interest = (Principal * Rate * Time) / 100. You multiply the principal amount by the interest rate and the time period, and then divide the result by 100.
| 3. How can I calculate compound interest? | |
Ans. To calculate compound interest, you need to know the principal amount, the interest rate, the compounding frequency, and the time period. The formula for calculating compound interest is: Compound Interest = Principal * (1 + Rate/100)^(Time) - Principal. You raise the sum of 1 and the interest rate divided by 100 to the power of the time period, and then multiply it by the principal amount.
| 4. Which type of interest is more beneficial, simple interest or compound interest? | |
Ans. Compound interest is generally more beneficial compared to simple interest. This is because compound interest allows the interest to accumulate over time, leading to a higher total interest amount. On the other hand, simple interest only calculates interest on the principal amount, which results in a lower overall interest earned.
| 5. Can compound interest be negative? | |
Ans. No, compound interest cannot be negative. Compound interest is always positive as it represents the growth of an investment over time. However, if the principal amount is negative, then the compound interest calculation may result in a negative total amount.
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Nov 18, 2024 Last updated |
Video Description: Simple & Compound Interest for CAT 2024 is part of Crash Course for XAT preparation.
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