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Monday,February13,2012
CheckthebasicsofSimpleInterestHERE

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The interest which is calculated NOT ONLY on the original

principal,butalsoontheINTERESTearnedinpreviousperiodis
calledCompoundInterest.

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From
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In S.I, interest is calculated on the original Principal only

(foralltheyears).Butfrom2ndyear,theC.Iiscalculated
notonlyontheoriginalprincipal,butalsoontheinterestof
thefirstyear.

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On the same sum and at the same rate of Interest, the C.I of
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Example:AssumethatShivaniborrows3,000atRate10%by
C.I.
TheC.Ionanyprincipalbecomeseffectiveonly
afterthe1styeariscomplete.Whichmeans,thatattheendof

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thefirstyear.So,atthefirstyear,theC.IisequaltotheS.Iof

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thePrincipal

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December (171)

so,S.I=PTR/100=(3000X1X10)/100=300
attheendofthefirstyear.
NOw,ifthesumborrowedwithC.I,theaboveS.I is added to
the Principal (So, in the above case, the principal becomes
3000+300 = 3300 ) and then if you calculate S.I on this

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November (179)
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amount, with the same S.I formula, you can get C.I for the

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secondyear.

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P=3300R=10T=1Year
C.Iforthe2ndyear=PTR/100=(3300X1X10)/100
C.I=330

February (269)
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ThetotalC.I=300(attheendofthe1styear)+330(atthe

September (172)

endofthe2ndyear)

August (188)
July (175)

=630
ThesameC.IcanalsobecalculatedbytheabovementionedC.I
formula.

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C.I=AmtPrincipal=

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