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CALCULATION OF INTEREST AND ANNUITIES
What is simple interest and how is it calculated?
Simple interest is interest calculated only on the principal amount. It is computed using the formula SI = P × R × T / 100, where P is principal, R is rate per annum, and T is time in years.
What is the formula for simple interest?
SI = Principal × Rate × Time / 100
What is compound interest and how does it differ from simple interest?
Compound interest is interest calculated on both the principal and previously accumulated interest. Unlike simple interest, it grows exponentially because interest earned in each period itself earns interest in subsequent periods.
If principal is Rs 10,000 at 10% per annum for 2 years, what is the simple interest?
Rs 2,000
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