Q1
What is the simple interest formula?
AI = (P × R × T) ÷ 100
BI = P(1+R/100)^T
CI = P + R + T
DI = P × R × T
ICSEClass 8 (ICSE)MathematicsCh 9 · Topic 1
Simple and Compound Interest
Simple interest is calculated only on the principal, while compound interest is calculated on the principal plus previously earned interest,
Core concept
Simple interest formula: I = (P × R × T) ÷ 100, where the interest amount stays the same each year based on the original principal.
How it works
Compound interest formula: A = P(1 + R/100)^T, where the amount grows because interest is calculated on the growing total each year.
Why it matters
For example, ₹1000 at 10% simple interest for 2 years earns ₹200, while compound interest earns ₹210 (since the second year's interest is on ₹1100).
Key detail
Compound interest is commonly used in savings accounts, loans, and investments, as it reflects real financial growth over time.
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• Simple interest: I = (P × R × T) ÷ 100.
• It stays constant each year, based on original principal.
• Compound interest: A = P(1 + R/100)^T.
• It grows because interest compounds on the total.
• ₹1000 at 10% for 2 years: simple=₹200, compound=₹210.
• Compound interest reflects real financial growth.
• It's used in savings accounts and loans.
• Understanding both helps financial decisions.