UPSKILL MATH PLUS

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Learn moreSimple interest means calculating the interest over the period at the rate of interest per annum and principal.

But in compound interest, the interest of the first year will be added to the principal, which is considered as the principal for the following year.

So, we can find that there is no difference in \(S.I\) and \(C.I\) for the first conversion period.

*Formula to calculate the difference in 2 years*:

If the principal \(P\) and the rate of interest per annum \(r\) are given, we can use the following formula to calculate the difference in the second year between the \(C.I\) and the \(S.I\).

$C.I-S.I\phantom{\rule{0.147em}{0ex}}=P{\left(\frac{r}{100}\right)}^{2}$.

*Formula to calculate the difference in 3 years*:

If the principal \(P\) and the rate of interest per annum \(r\) are given, we can use the following formula to calculate the difference in the third year between the \(C.I\) and the \(S.I\).

$C.I\phantom{\rule{0.147em}{0ex}}-S.I\phantom{\rule{0.147em}{0ex}}=\phantom{\rule{0.147em}{0ex}}P{\left(\frac{r}{100}\right)}^{2}\left(3+\frac{r}{100}\right)$.