Class 8 Chapter 10: Simple and Compound Interest

Important Concepts and Formulas

1.    The money taken as loan or invested is called the principal.

2.    The additional amount that a borrower has to repay is called the interest.

3.    Simple interest is calculated only on the principal at the start.

4.    Simple Interest = P × R × T/100

5.    The interest calculated on both the principal and the accrued interest is called the compound interest.

6.  Amount (A) = P(1 + R%)ⁿ

7.    Compound Interest = [P(1 + R%)ⁿ] – P = P[(1 + R%)ⁿ – 1]

(Where P = Principal, R = annual interest rate in percentage terms, and n = number of compounding periods.)

8.      Compound Interest (C.I.) = A – P.

9.      The period after which the interest is added to the principal is called conversion period.

10.    If rates are different for the consecutive years, then amount is P(1 + R₁) (1 + R₂) (1 + R₃)… where R₁ is rate percent for 1st year, R₂ is rate percent for 2nd year, R₃ is rate percent for 3rd year and so on.

11. In case of depreciation, the rate R is replaced by (–R) in the formula.

So, A = P(1 + R%)ⁿ becomes A = P(1 – R%)ⁿ

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