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Basic formulas - Simple Interest and Compound Interest

Simple Interest

1) If P is the Principle, R is the rate of interest per annum (in percentage), T is the time in years then

2) Simple Interest (SI) is same for all the years

3) Annual installment (Y) that discharges a loan of amount A due after T years rate of interest being R% per annum

Compound Interest

Let Principle = P, Rate = R% per annum, Time = T years, Frequency = N
Frequency means number of times we get interest in a year

5) For the first year Simple Interest and Compound Interest are equal.

6) When interest is compounded annually then, N = 1

7) When interest is compounded half-yearly then, N = 2

8) When interest is compounded quarterly then, N = 4

9) When interest is compounded monthly then, N = 12

10) When rates are different for different years i.e. for 1st, 2nd, 3rd,---,, Nth year respectively then

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