Simple and Compound Interest
Simple and Compound Interest are key aptitude topics used in financial calculations. These concepts are widely asked in banking, SSC, CMAT, and placement exams.
Fundamental Principles
Simple Interest (SI)
Interest calculated only on the principal amount.
Compound Interest (CI)
Interest calculated on principal plus accumulated interest.
Principal (P)
The initial amount of money invested or borrowed.
Rate (R)
The percentage of interest per year.
Time (T)
The duration for which money is invested or borrowed.
Essential Formulation Tips
- Use SI formula for direct calculations.
- Use CI shortcut formulas for 2–3 years.
- Always check if interest is compounded annually, half-yearly, or quarterly.
- Convert rate accordingly for compound interest.
Shortcut Execution Techniques
- SI = (P × R × T) / 100.
- CI = P(1 + R/100)^T − P.
- For 2 years: CI − SI = P(R/100)^2.
- For half-yearly: divide rate by 2 and multiply time by 2.
Contextual Inquiries (FAQs)
Q: What is the difference between SI and CI?
A:
Q: What is the fastest way to solve CI questions?
A:
Example Breakdown: Simple Interest Example
Basic question.SI = (P × R × T)/100.
SI = (1000 × 10 × 2)/100 = 200.
Final Answer: Rs. 200.
Example Breakdown: Compound Interest Example
Most common exam question.A = P(1 + R/100)^T.
A = 1000(1.1)^2 = 1000 × 1.21 = 1210.
CI = 1210 − 1000 = 210.
Final Answer: Rs. 210.
Example Breakdown: Difference Example
High scoring question.Use shortcut: CI − SI = P(R/100)^2.
= 1000 × (10/100)^2 = 1000 × 0.01 = 10.
Final Answer: Rs. 10.
SI & CI Practice Questions
Solve important interest questions for banking, SSC, CMAT, and placement exams.
Q1. Find SI on Rs. 2000 at 5% for 3 years.
Q2. Find CI on Rs. 1000 at 10% for 1 year.
Q3. Difference between CI and SI for 2 years at 10% on Rs. 500?