Simple Interest

Interest is nothing but a money which is taken over the

original amount. Let us suppose if you are taking a loan of
100,000 from the bank for six month at the rate of 3%
monthly then the amount will be returned to the bank is
118,000 which is obtained as
Interest for the six months on 100,000 is
100,000*6*3/100=18,000.
and the amount returned to the bank is =
100,000+18000=118000
And the formula is I=p*r*t
Where I=Interest
P=Principal Amount
R=Rate of interest
T=Time
Compound Interest
Let us suppose we have 100 rupees the increment for the two years is as
follows
1).at the end of first year the interest is 20%
2). at the end of second year the interest is 30% of the first year amount

So after addition of 20% interest at the end of first year we have 120 rupees
and
at the end of second year we have 30*120/100+120=156 rupees.

i.e. the compound interest is nothing but accumulated interested amount

Formula for calculating compound interest:

r
A = P(1 + ) kt
k

Where,

 P = principal amount (initial investment)

 r = annual nominal interest rate (as a decimal)
 k = number of times the interest is compounded per year
 t = number of years
 A = amount after time t