Simple Interest Formula
Simple Interest = P × R × T / 100
Where P = Principal, R = Rate per annum, T = Time in years
Example Calculation
For ₹1,00,000 at 7% for 5 years:
- Interest = ₹1,00,000 × 7 × 5 / 100 = ₹35,000
- Total Amount = ₹1,00,000 + ₹35,000 = ₹1,35,000
Simple vs Compound Interest
| ₹1 Lakh at 7% | Simple Interest | Compound Interest |
|---|---|---|
| 5 years | ₹1.35 L | ₹1.40 L |
| 10 years | ₹1.70 L | ₹1.97 L |
| 20 years | ₹2.40 L | ₹3.87 L |
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Key Difference
The longer the duration, the greater the difference between simple and compound interest. Compound interest grows exponentially while simple interest grows linearly.