Interest

Interest : When a person borrows some amount of money from  another person or organisation (bank), then the person  borrowing money (borrower) pays some extra money  during repayment, that extra money during repayment is  called the interest 

Principal (P) : The money borrowed or lent out for a  certain period is called the principal or the sum

Rate of Interest (r) : It is the rate at which the interest is  charged on principal. It is always specified in percentage  terms 

Time (t) : The period, for which the money is borrowed or  deposited, is called time 

Amount (A) : The sum of principal and interest is called  amount

Compound Interest

In compound interest, interest (yearly, half-yearly,  quarterly and monthly) is fixed upto settle the previous  account. The interest due at the end of the unit of time is  added to the principal and the amount so obtained becomes  the principal for the next unit of time 

• Amount = A
• Principal = P
• Rate of Interest = r (%)
• Time = n (Year, month)

1. If compound interest is annually, then

Compound Interest (CI) = Amount (A) - P