Project Prepared By

G.G.Sec.School Bhargo Camp Jalandhar

(Math Mistress)

Promila Walia

Types of Interest

1. 2.

Simple Interest Compounded Interest

Simple Interest

Simple Interest which is commonly referred to as S.I. means that calculation of annual installment paid on the sum of loan taken by a person for a specific period of time.

Calculation of S.I.
S.I. = (P*R*T) / 100
Where: P – Principal Sum of Loan Taken R – Interest Rate at which Loan is Taken T – Time Period for which loan is Taken

Above Mentioned formula tells us the annual amount of interest to be paid by the customer. & after specific period of time he has to return total Amount which is cal. As: Amount = Principal + S.I.

Compound Interest

Compound Interest which is commonly referred to as C.I. means that calculation of annual Compounded installment paid on the sum of loan taken by a person for a specific period of time.

Calculation of C.I.
C.I. = [ P*(1 + R)T – 1 ]
Where: P – Principal Sum of Loan Taken R – Interest Rate at which Loan is Taken T – Time Period for which loan is Taken
Above Mentioned formula tells us the annual amount of compounded interest to be paid by the customer. & after specific period of time he has to return total Amount which is cal. As: Amount = Principal + C.I.

Difference B/w S.I & C.I
S.I.

C.I.

Principal Remains Constant through out loan period.

Principal Changes after every year with previous year Interest being added up in to Principal. C.I amount is generally more than the principal.

S.I amount is generally less.

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