Question

What is the most common method of calculating interest?

Answer 1

The two most common methods of calculating interest are simple interest and compound interest.

Simple Interest:

Simple Interest is the method of calculating the interest amount for some principal amount of money.

Formula:

$S.I=\frac{P\times T\times R}{100}$

Where $P$ is the principal amount, $T$ is the time period, and $R$ is the interest rate.

Compound Interest:

Compound interest is the interest calculated on the principal and the interest accumulated over the previous period.

Formula:

$C.I=P{\left(1+\frac{r}{n}\right)}^{nt}-P$

Where $P$ is the principal amount, $t$ is the time period, $r$ is the interest rate, and $n$ is the number of times interest is compounded per year.