Simple and Compound Interest: SI–CI Difference, Half-Yearly Compounding and Doubling Shortcuts

Interest: Why Two Formulas Cover Dozens of Questions

Interest is the price of borrowing money. Simple Interest (SI) is charged only on the original sum, called the principal, so it grows by the same amount every year. Compound Interest (CI) is charged on the principal plus the interest already earned, so it grows faster each year.

For example, ₹1000 at 10% per annum: SI gives ₹100 every year, so ₹1300 after 3 years. CI gives ₹100, then ₹110, then ₹121, so ₹1331 after 3 years. The extra ₹31 is interest earned on interest.

Every SI and CI question in SSC, Railway and TRE-4 papers is built from just two ideas: SI = P×R×T/100, and Amount A = P(1 + R/100)^n for CI. Learn these two cleanly, plus the shortcut for the SI–CI difference, and most questions finish in under 30 seconds.

1. Find the simple interest on ₹6000 at 7% per annum for 4 years.

2. What is the compound interest on ₹5000 at 10% per annum for 2 years?

3. The difference between compound interest and simple interest on ₹4000 at 5% per annum for 2 years is:

4. A sum of money doubles itself in 8 years at simple interest. In how many years will it become three times itself?

5. Find the compound interest on ₹8000 for 1 year at 20% per annum, compounded half-yearly.

6. What is the effective rate of compound interest for 2 years if the rate is 20% per annum, compounded yearly?

7. At what rate of simple interest per annum will ₹2500 amount to ₹3000 in 4 years?

8. Find the simple interest on ₹12000 at 5% per annum for 9 months.