Compound Interest • Topic 1 of 3

Compound Interest as Repeated Simple Interest

What is Compound Interest?

Compound Interest (CI) is the interest calculated on the initial principal and also on the accumulated interest from previous periods. Unlike simple interest, where interest is calculated only on the original principal, compound interest grows faster because you earn "interest on interest."

Simple Interest vs Compound Interest:

Feature	Simple Interest (SI)	Compound Interest (CI)
Interest Calculation	Only on original principal	On principal + previous interest
Growth	Linear	Exponential
Formula	SI = (P × R × T)/100	CI = P(1 + r/100)ⁿ - P

How Compound Interest Works (Step by Step):

Year 1: Interest is calculated on the original principal (P)
Year 2: Interest is calculated on (P + Year 1 interest)
Year 3: Interest is calculated on (P + Year 1 interest + Year 2 interest)
And so on...

Key Terms:

Principal (P): The initial amount of money
Rate (R/r): The percentage of interest per time period
Time (n/t): The number of time periods
Amount (A): The total money after interest (Principal + Compound Interest)

Solved Examples

Worked Example

Solve a standard problem on Compound Interest as Repeated Simple Interest.

Solution

Apply the formula/method shown in the concept section above.

Key Points

Understand the definition and properties of Compound Interest as Repeated Simple Interest.
Study the worked examples and practice similar problems.
Always verify your answer using the original conditions.

Quick Check — 4 MCQs

Tap an option to check your answer0 / 4

Q1.For the first year, compound interest and simple interest are:

Explanation: Equal in year one.

Q2.Under CI, the amount at the end of a year becomes the next year's:

Explanation: New principal.

Q3.For more than one year, compound interest is ___ simple interest.

Explanation: Greater.

Q4.The simple interest on Rs $1000$ at $10\%$ for $1$ year is:

Explanation: Rs $100$.

Practice more MCQs → 📝 Assignment · 35 marks