Activity › Discussion › Math › What are compound and simple interests? › Reply To: What are compound and simple interests?
AashutoshMemberMay 22, 2021 at 7:40 pm::
Simple Interest: Simple interest is defined as the principal amount of loan or deposit, a person makes into their bank account. It is the sum we have to pay back for borrowed money, over a fixed period of time.
S.I. = (P × T × R) ⁄ 100
Compound Interest: Compound interest is simply the interest that accumulates and compounds over the principal amount. It is paid back when the sum principal amount exceeds the due date for payment along with the rate of interest, for a period of time.
C.I. = P(1+R/100)^t− P
Major differences between Simple and Compound Interests:
1. The return in Simple Interest is much lesser than Compound Interest.
2. The principal amount in SI is constant whereas in CI it keeps on varying during the entire borrowing period.
3. The growth remains quite uniform in SI whereas it increases quite rapidly in CI.
4. In SI the interest charged is for the principal amount while the interest charged in CI is for the principal and accumulated interest.