As I have told you maths is used in many place even in banks and this maths is known as Commerce or Commercial Maths. If you had taken loan then you had noticed that they give you a time periods of 1, 1.5 or 3 years. If you had taken loan of 50,000 for 3 years at the rate of 15% p.a. then the simple interest would be as follows:

S.I. = (50,000 * 15 * 3) / 100

= Rs. 22,500

So, till now you have understood that the formula is S.I. = ( P * R * T ) / 100

Another method is that to find the amount and then subtracting it with the principal, this gives you Compound interest.

Ex: On the same information given above the compound will be:

**( Remember the time interval changes when the rate is compounded half yearly and annually.) **

Amount = Principal * ( 1 + 15/100 ) * ( 1 + 15/100 ) * ( 1 + 15/100 )

A = 50,000 * ( 1 + 15/100 ) * ( 1 + 15/100 ) * ( 1 + 15/100 )

Therefore, A = 76043.75

C.I = A – P

= 76,043.75 – 50,000

= Rs. 26,043.75

This shows that C.I. and S.I. different when calculated. If the time span is same then the Interests would be same.

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