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Simple Interest vs Compound Interest. Quick 2-Minute Explanation.
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Introduction. Interest is the extra money paid for using borrowed money. Two common types: • Simple Interest (SI) • Compound Interest (CI).
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Simple Interest (SI). Formula: SI = (P × R × T) / 100 Example: Principal (P) = ₹1000 Rate (R) = 10% per year Time (T) = 2 years SI = 200.
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Compound Interest (CI). Formula: A = P(1 + R/100)^T Example: Principal (P) = ₹1000 Rate (R) = 10% per year Time (T) = 2 years Amount (A) = 1210 CI = 210.
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Difference Between SI and CI. • SI is calculated only on the principal. • CI is calculated on principal + accumulated interest. • SI remains constant. • CI increases with time..
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Conclusion. • Simple Interest is easy to calculate. • Compound Interest grows faster. • CI is commonly used in banking & investments. Thank You!.