Consider you have deposited Rs 100 for 2 years on 10% Simple interest per annum, then we have
Thus after one year amount will become = 100 + 10 = Rs 110
Here note that in 2^{nd} year interest is not calculated on amount (Rs 110) but Principal i.e, Rs 100.
Thus Simple interest after two years =Rs 10 + Rs 10= Rs 20.
It can also be calculated be using formula –
Simple interest
Thus for above example Simple interest
Also the final amount will be Rs 20 + Rs 100 = Rs 120.
Note : If rate of interest is not given in per annum then change the time according to the period over which interest is given.
For example : If interest is given as 10 % per quarter for 2years , then the time will have to be changed into quarters.
Time = 2 years = 2× 4 = 8 quarters
Thus Simple interest on Rs 100
Again Consider you have deposited Rs. 100 for 2 years on 10% Compound interest per annum, then we have.
Compound interest after 1^{st} year
Thus after one year amount will become = 100+ 10 = Rs 110
Compound interest for 2^{nd} year
Here note that in 2^{nd} year interest is calculated on amount ( Rs 110) and not on Principal i.e, Rs 100.
Thus Compound interest after two years = Rs 10+ Rs 11= Rs 21
Final Amount = 100+ 21 =Rs 121
We can also find this using direct formula as given below
For Amount we can use –
Note
When compound interest Compounded half yearly, then R% become and time T becomes 2T. For quarterly compounding we can change the rate and time accordingly
Q1: A sum of 1600 gives a simple interest of 252 in 2 years and 3 months. Calculate the rate of interest per annum.
Sol: We know
Q2: A sum of money deposited at simple interest amounts to 880 in 2 years and to 920 in 3 years. Find the sum.
Sol: Amount after two years = Rs 880
Amount after three years = Rs 920
Thus interest obtained per year = 920 880 = Rs 40
For two years interest = 40×2 = Rs 80
Therefore Principal = 88080 = Rs 800
Q3: Find the rate of simple interest for which a sum of money becomes 5 times of itself in 8 years.
Sol: Let the principal be P
Since Sum becomes 5 times of itself.
Q4: In how many years will 2,000 amounts to 2420 at 10% per annum if Compounded annually?
Sol: T= 2 years
Q5: A sum becomes 4500 after two years and 6750 after four years at compound interest.Find the sum.
Sol: Let the principal be x
We have
Dividing B by A , we get
Comparing Equation A with C, we get
Sum = Rs 3000
185 videos158 docs113 tests

1. What is simple interest? 
2. How is simple interest different from compound interest? 
3. How can I calculate the simple interest for a given loan or investment? 
4. Is simple interest commonly used in financial institutions? 
5. Can you provide an example of simple interest calculation? 
185 videos158 docs113 tests


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