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Compound Interest

Comparing Quantities · Class VIII

Compare simple vs compound interest as you change principal, rate and time.

10,000 Rs
type a value
100100000
10 %/yr
type a value
120
3 yr
type a value
110
Live values
  • Simple Interest3,000
  • CI Amount13,310
  • CI Interest3,310
xy
  • CI Amount over years

Formulas in this lab

  • Simple Interest
    P R T100\dfrac{P\,R\,T}{100}
  • CI Amount
    P(1+R100)TP\left(1+\dfrac{R}{100}\right)^{T}
  • CI Interest
    P(1+R100)T−PP\left(1+\tfrac{R}{100}\right)^{T} - P
Tip: CI grows faster than SI because each year's interest itself earns interest.

Frequently asked questions

▶What is compound interest and how is it calculated?

Compound interest is interest on interest. The formula is $A = P(1 + R/100)^T$ for yearly compounding. So Rs 10000 at 10% for 3 years grows to 10000 * 1.331 = Rs 13310, with interest Rs 3310.

▶How do I use the compound interest lab?

Slide principal P, rate R and time T. The lab shows both compound and simple interest side by side so you can compare. Try P = 10000, R = 10, T = 5 to see CI of Rs 6105 and SI of only Rs 5000.

▶How is compound interest used in Indian banks?

Fixed deposits and recurring deposits in Indian banks usually compound interest quarterly. A Rs 50000 FD at 7% for 3 years gives roughly 50000 * (1.07)^3 = Rs 61252. The lab uses yearly compounding for simplicity but the idea is the same.

▶SI vs CI: when is the gap noticeable?

For 1 year, SI and CI give the same amount. For 2 years the gap is one extra dose of interest on the first year's interest. For 10 years on Rs 100000 at 10%, SI gives Rs 100000 interest while CI gives about Rs 159374. The lab shows this widening gap clearly.