Interest – Brief Description
Interest is the extra money paid or earned on a principal amount when money is borrowed or lent for a certain time.
📌 Important Terms
Principal (P): Original amount of money
Rate (R): Interest rate per year (%)
Time (T): Time period (in years)
Amount (A): Total money after interest
🔸 Simple Interest (SI)
Interest calculated only on the principal.
Formula:
Amount:
A = P + SI
✔ Interest remains the same every year
🔸 Compound Interest (CI)
Interest calculated on principal + previous interest.
Formula:
\text{CI} = A − P
✔ Interest increases every year
✔ Used by banks and investments
🎯 Key Differences
Simple Interest
Compound Interest
On principal only
On principal + interest
Linear growth
Faster (exponential) growth
