pl explain the simple & compound with exmple
Asked by sannp_2009 | 2nd Dec, 2018, 08:37: PM
If we invest an amount of Rs. P for n yeras and at r% per annum at simple rate of interest then simple interest is calculated as Pnr/100.
P = Rs. 1000, r = 10% per annum, n = 2 yares then simple interest will be
Simple interest = 1000 × 10 × 2/100 = Rs. 200
If we invest an amount of Rs. P for n years and at r% per annum compounded annually then compound interest is calculated as P(1 + r/100)n - P where
A = P(1 + r/100)n
P = Rs. 1000, r = 10% per annum compounded annually for n = 2 years then amount we will get
A = 1000(1 + 10/100)2 = 1000(1 + 0.1)2 = 1000 × 1.12 = Rs. 1210
Compound interest = A - P = 1210 - 1000 = Rs. 210
From the above example we conclude that we get more interest if rate is compounded annually rather than on simple interest.
Answered by Sneha shidid | 3rd Dec, 2018, 09:50: AM
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