Interest refers to the cost of your borrowing money where a borrower pays the fee to a lender for their loan, and it can be in the form of a percentage or be compounded or simple. Simple Interest is based on the principal amount of a deposit or a loan. On the other hand, the Compound Interest depends on the interest and the principal amount that gets collected each period. For your convenience, we are going to state the Compound Interest and Simple Interest Formula. The formula of Simple Interest The computation of Simple Interest is done by multiplying the rate of interest for a certain period by the tenure and the principal amount. Tenure is in years, months, or days. So, you have to convert the interest before you multiply it with the tenure and the principal amount. You can use the formula given below to calculate Simple Interest. Simple Interest = P X I X N P stands for Principal, I and N refer to the interest rate of the period, and N is the tenure. Get Answers related to the KYC process, anytime and anywhere Contact Bajaj Finserv Customer Care Number. The formula of Compound Interest CI or Compound Interest gets calculated through the multiplication of one plus the interest raised to the power of the period of compounding with the principal amount. The principal amount needs to be subtracted to get the Compound Interest. The following is the formula for Compound Interest. A= P (1+r/n) ^ (n x t) – 1) Here, A is Compound Interest, P is the Principal Amount, r is the rate of interest, n refers to the compounding periods, and t stands for the duration or the number of years. We have referred to the Compound Interest and Simple Interest Formula. If you need to know the best personal loan interest rates, you can reach out to financial institutions with Bajaj Finserv. Read Also: How to Use the Compound Interest Rate Formula?
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AuthorAman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management. |