ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The interest formula includes the two types of interests-simple interest and compound interest. The word interest means the extra amount with the loan amount taken. The extra amount or the interest is what needs to be paid along with the actual loan.

Detailed explanation-2: -P stands for principal; i stands for interest; n stands for the number of compounding periods. If that was confusing, let’s try an example. If we have a principal amount of $10, 000 with an annual interest rate of 5% over a five-year period, the equation will stand as: Compound Interest = 10, 000 [(1 + 0.05)5 – 10, 000.

Detailed explanation-3: -The compound interest formula is ((P*(1+i)^n)-P), where P is the principal, i is the annual interest rate, and n is the number of periods.

Detailed explanation-4: -Formula: I=prt where I is the interest earned, p is the principal (money either invested or borrowed), r is the annual interest rate written in decimal form, and t is the time in years for which the interest is paid. Example 1: You invest $200 at 8% simple interest for 6 years.

Detailed explanation-5: -Simple Interest Formula To calculate simple interest, multiply the principal amount by the interest rate and the time. The formula written out is “Simple Interest = Principal x Interest Rate x Time.” This equation is the simplest way of calculating interest.