Business Mathematics and Statistics · Class 11 Commerce
Ch 4Simple and Compound Interest — Class 11 Business Mathematics and Statistics, concept-first.
When a sum of money is lent by one person (the lender) to another (the borrower), the borrower pays an extra charge for the use of that money over and above the amount actually borrowed. This extra charge is called interest.
Key concepts
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Simple Interest
Simple Interest
Most relevant Q&A
- A sum of ₹7,440 is the amount received after 3 years on a certain principal lent at 8% per annum simple interest. Find the principal.Free
- Find the simple interest on ₹8,000 for 4 years at 6% per annum, and the amount payable at the end of the period.Free
- At what rate percent per annum will ₹5,000 yield ₹1,500 as simple interest in 5 years?Free
- In how many years will a sum of money double itself at 8% per annum simple interest?Free
In previous exams
How often this chapter’s concepts have been examined — real appearance data, never estimated.
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Interest and the Basic Terms
When a sum of money is lent by one person (the lender) to another (the borrower), the borrower pays an extra charge for the use of that money over and above the amount actually borrowed.
Simple Interest — Concept and Formula
Simple interest (SI) is interest calculated only on the original principal for the entire period of the loan or deposit.
Working with the Simple Interest Formula
The single relation contains four quantities, so if any three of them are known the fourth can be found by rearranging the same formula.
Compound Interest — Concept and Features
Under compound interest (CI), the interest earned at the end of each period is added to the principal, and the interest for the next period is then calculated on this new, larger sum.
Compound Interest — Formula and Amount
Repeatedly multiplying the running amount by the same growth factor leads directly to a compact formula.
Different Compounding Periods
So far interest has been compounded once a year. In practice, banks and financial institutions often compound interest more frequently — half-yearly, quarterly or monthly.
Difference Between Simple and Compound Interest
Both methods start from the same principal, rate and time, yet they behave very differently over more than one period.
Exercises
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- Q9A sum of ₹7,440 is the amount received after 3 years on a certain principal lent at 8% per annum simple interest. Find the principal.Free
- Q10At what rate percent per annum, compounded annually, will ₹6,250 amount to ₹7,290 in 2 years?Free
- Q11Find the amount on ₹12,000 for 6 months at 12% per annum, compounded monthly.Preview
- Q12Distinguish between simple interest and compound interest, giving the formula for each and one point on how they grow over time.Preview
- Q13The compound interest on a certain sum for 2 years at 10% per annum (compounded annually) is ₹210. Which of the following is the sum? (a) ₹1…Preview
More questions
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- Example 1Find the simple interest on ₹8,000 for 4 years at 6% per annum, and the amount payable at the end of the period.Free
- Example 2At what rate percent per annum will ₹5,000 yield ₹1,500 as simple interest in 5 years?Free
- Example 3In how many years will a sum of money double itself at 8% per annum simple interest?Free
- Example 4Find the compound interest on ₹10,000 for 3 years at 10% per annum, compounded annually.Preview
- Example 5Find the amount and the compound interest on ₹8,000 for 1½ years at 10% per annum, compounded half-yearly.Preview
- Example 6Find the compound interest on ₹10,000 for 1 year at 8% per annum, compounded quarterly.Preview
- Example 7Find the difference between the compound interest and the simple interest on ₹12,000 for 2 years at 5% per annum (compounded annually).Preview
- Example 8A sum of money amounts to ₹9,680 in 2 years at 10% per annum compound interest, compounded annually. Find the principal.Preview