The simple interest rate is a ratio and is typically expressed as a percentage. It plays an important role in determining the amount of interest on a loan or investment. The amount of interest charged or earned depends on three important quantities that we will examine next. The formula is given below.

The **Interest formula** is given as,

## INTEREST FORMULA PROBLEMS

The solved problems on interest formula are given below:

### SOLVED EXAMPLES

**Question 1:**A sum of Rs 4000 is borrowed and the rate is 7%. What is the simple and compound interest for 2 years?

**Solution:**

SimpleInterest=Principle∗Rate∗Time= 4000 × 7/100 × 2

Simple Interest = 560

The simple Interest for 2 years is Rs 560

CompoundInterest=Principal∗(1+Rate)Time−Principal

CompoundInterest=4000∗(1+7/100)2−4000

Compound Interest = 4000 × 1.0064 – 4000

Compound Interest = 560

The compound interest for 2 years is Rs 560