Interest
About 6 min · Elementary Mathematics · English
Time worked out from the lesson's 379 words at 150 words a minute, plus a minute for each question.
Interest is the extra money paid for borrowing or earned by lending a sum of money over time. The exam tests two main types: Simple Interest (SI), where interest stays constant each year, and Compound Interest (CI), where interest is calculated on the accumulated amount. Mastery requires understanding the formulas, recognizing which type applies, and executing time-based calculations accurately. Questions may involve finding principal, rate, time, or the interest itself. A few tricky problems combine SI and CI or ask for the difference between them. With systematic practice, this topic becomes a reliable mark-getter because the formulas are fixed and the arithmetic is straightforward.
Key ideas
- Principal (P): The original sum of money borrowed or invested. This is your starting amount before any interest is added.
- Rate of Interest (R): The percentage charged per time period (usually per annum). Always express rate as a percentage in formulas; for example, 5% means R = 5.
- Time (T): The duration for which money is borrowed or invested, typically in years. Convert months into years by dividing by 12 if needed.
- Simple Interest (SI): Interest calculated only on the principal throughout the entire period. It remains the same every year and does not compound.
- Compound Interest (CI): Interest calculated on the principal plus any interest already earned. The amount grows exponentially because each period's interest becomes part of the next period's principal.
Quick reference
- SI = (P × R × T) / 100; grows linearly each year.
- CI amount: A = P(1 + R/100)^T; interest compounds on interest.
- For 2 years, CI - SI = P(R/100)² — useful shortcut for difference questions.
- Half-yearly means R/2 and 2T; quarterly means R/4 and 4T.
- Always subtract principal from amount to get the actual interest earned.
Check yourself: 3 questions
1. A sum of Rs. 8000 is invested at 5% simple interest per annum. What will be the total interest earned after 3 years?
2. What principal amount will give a simple interest of Rs. 360 in 2 years at the rate of 6% per annum?
3. A sum of Rs. 5000 amounts to Rs. 5832 in 2 years at a certain rate of compound interest compounded annually. What is the rate of interest per annum?
This lesson is cut from the topic's note, not rewritten. Fact-checked on 18 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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