MPESB Group · Bite-size lessons
Simple and Compound Interest
About 5 min · Mathematics · English
Time worked out from the lesson's 282 words at 150 words a minute, plus a minute for each question.
Simple and Compound Interest is a high-scoring topic in MPESB Group 1/2/3 examinations. This topic tests your ability to calculate interest earned on principal amounts over time using two distinct methods—one where interest remains constant each period, the other where interest compounds on accumulated amounts.
Key ideas
- Principal (P) is the original sum of money borrowed or invested before any interest is added.
- Simple Interest (SI) is calculated only on the original principal, remaining constant for each time period regardless of accumulated interest.
- Compound Interest (CI) is calculated on the principal plus previously accumulated interest, making the interest grow exponentially over time.
- Rate (R) is always expressed as percentage per annum unless stated otherwise; convert to decimal form (R/100) in formulas.
- Time (T/n) must match the compounding frequency—if interest compounds half-yearly, convert annual rate to half-yearly rate and double the time periods.
Quick reference
- SI = PTR/100; CI uses power formula A = P(1 + R/100)^n
- CI − SI for 2 years = P × (R/100)² — memorize this shortcut
- Half-yearly: halve the rate, double the time periods
- Amount doubles under SI when T = 100/R years
- CI always exceeds SI when time > 1 year
Check yourself: 3 questions
1. A sum of Rs. 8000 is invested at 10% per annum simple interest for 3 years. What is the total amount received at the end of 3 years?
2. At what rate percent per annum will Rs. 6000 amount to Rs. 7200 in 4 years at simple interest?
3. A sum of Rs. 10,000 is invested at 12% per annum compound interest compounded annually. What will be the amount after 2 years?
This lesson is cut from the topic's note, not rewritten. Fact-checked on 17 Oct 2026: an AI-assisted check of this note against cited sources; the errors it found were corrected that day. Some errors may remain. The questions are from Shishya's validated question bank.
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