Simple & Compound Interest • Topic 3 of 4

SI vs CI

Over one year SI and CI on the same sum and rate are equal. The gap appears from year two: CI - SI for 2 years = P(R/100)^2. For 3 years, CI - SI = P(R/100)^2 x (3 + R/100). These formulas let you find the principal or rate directly from the stated difference, a frequent SSC shortcut.

✅ Solved examples

1. Difference between CI and SI on 8000 at 5% for 2 years?
P(R/100)^2 = 8000 x (0.05)^2 = 8000 x 0.0025 = 20.
2. The CI-SI difference for 2 years at 10% is 50. Principal?
P x 0.01 = 50 -> P = 5000.
3. For 10000 at 10%, difference for 2 years?
10000 x 0.01 = 100.
4. At 20%, the 2-year CI-SI difference is 80. Principal?
P x (0.2)^2 = P x 0.04 = 80 -> P = 2000.

✏️ Practice — try these, take hints as needed

1. CI-SI on 6000 at 10% for 2 years?
P(R/100)^2.
6000 x 0.01.
—
60
2. Difference 90 at 10% for 2 years. P?
P x 0.01 = 90.
—
—
9000
3. CI-SI on 5000 at 4% for 2 years?
5000 x 0.0016.
—
—
8
4. Difference 45 at 5% for 2 years. P?
P x 0.0025 = 45.
—
—
18000
5. CI-SI on 2000 at 5% for 2 years?
2000 x 0.0025.
—
—
5

📝 Topic test — 8 questions

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