Simple Interest Formula
Simple Interest = P × R × T / 100
Where P = Principal, R = Rate per annum, T = Time in years
Example Calculation
For 100,000 at 7% for 5 years:
- Interest = 100,000 × 7 × 5 / 100 = 35,000
- Total Amount = 100,000 + 35,000 = 135,000
Simple vs Compound Interest
| 100,000 at 7% | Simple Interest | Compound Interest |
|---|---|---|
| 5 years | 1.35 L | 1.4 L |
| 10 years | 1.7 L | 1.97 L |
| 20 years | 2.4 L | 3.87 L |
💡
Key Difference
The longer the duration, the greater the difference between simple and compound interest. Compound interest grows exponentially while simple interest grows linearly.