RRB Group D · Bite-size lessons
Simple and Compound Interest
About 6 min · Mathematics · English
Time worked out from the lesson's 364 words at 150 words a minute, plus a minute for each question.
These questions test your ability to calculate interest earned or paid on borrowed or invested money over time. Unlike many theoretical topics, interest calculations are direct and formula-driven, making them high-scoring if you master the fundamentals.
Key ideas
- Simple Interest (SI) is interest calculated only on the original principal throughout the loan/investment period. It grows linearly—if you invest ₹1000 at 10% SI for 3 years, you earn ₹100 each year, totaling ₹300.
- Compound Interest (CI) is interest calculated on the principal plus accumulated interest from previous periods. The interest "compounds" or multiplies. The same ₹1000 at 10% CI for 3 years earns ₹100 in year 1, ₹110 in year 2, and ₹121 in year 3, totaling ₹331.
- Principal (P) is the original sum of money borrowed or invested. Rate (R) is the percentage interest per time period (usually per year). Time (T) is the duration for which money is borrowed or invested, expressed in years unless stated otherwise.
- Amount (A) is the total money returned at the end—it equals Principal + Interest. For SI: A = P + SI. For CI: A = P(1 + R/100)^T.
- Compounding frequency matters for CI. Annual compounding applies interest once per year. Half-yearly compounding applies interest twice per year (rate becomes R/2, time becomes 2T). Quarterly compounding uses R/4 and 4T.
Quick reference
- SI = PRT/100 — Multiply principal, rate, time; divide by 100.
- A = P(1 + R/100)^T — Compound interest amount formula (annual).
- Half-yearly CI: Use R/2 and 2T in the CI formula.
- For 2 years, CI - SI = P(R/100)² — Quick comparison shortcut.
- Amount = Principal + Interest — Always separate the two components.
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. What sum of money will amount to Rs 13,310 in 3 years at 10% per annum compound interest (compounded annually)?
3. The difference between compound interest and simple interest on a sum of Rs 15,000 for 2 years at 8% per annum is:
This lesson is cut from the topic's note, not rewritten. Fact-checked on 21 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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