What is compound interest

What is compound interest

Contents

1. What is compound interest

2. Types of interest
a. Simple interest
b. Compound interest

3. What are the advantages and use of compound interest
a. Difference between simple interst and compound interest

4. How to calculate compound interest

 What is compound interest?  Friends, in today's topic, you will know what are the benefits and use of compound interest.  Also we will understand what is the difference between simple interest and compound interest?  And how is compound interest calculated?

 What is COMPOUND INTEREST?

 You must have heard about interest or interest,

 "Interest" given for the use of money is called "Rent" or "Rent",

 The one who uses the money takes the "Vyaj", and the one who uses the money, ie the Vyaj, who takes the money, and the Vyaja is fixed as a percentage, over time "

 like -

 Money given by the bank to people in the form of loans - BANK LOAN,

 Now here the bank is giving "money" to its customer in the form of loan, and in exchange for the use of this money, it will take interest from the customer and give the customer interest, interest is already fixed as a percentage,  Such as 15% annual rate, or 10% annual rate,

 Types of interest -

 (Simple Interest) Simple Interest -

 When the Rate of Interest or Amount is fixed on the loan given, or the loan taken (LOAN) at a "fixed time interval" (TIME),

 Eg - fixed 2% interest on a loan of Rs 10,000 per month,

 Here 10 thousand rupees will be called the principal (principal), and 2% interest will be calculated on that fixed principal.

 Compound interest (compound interest) -

 In compound interest, the principal amount changes every time period, and the interest in the old principal is added to the principal amount,

 And back to this new amount (principal + interest), a predetermined rate interest is drawn,

 And this goes on and on,

 Eg - 2% compound interest at 10 thousand rupees means,

 In the first month, 10 thousand rupees, which is the Princial amount, 2% interest will be drawn on it, which will be Rs. 200,

 After this, the new principal amount will be in the second month -

 Principal Amount + Interest = New Principal .

 (10000 +200) = 10,200 and now 2 months interest will be drawn on the new principal amount for the second month - which will be Rs. 204,

 And now the principal amount for the third month will be 10200 + 204 = 10404

 And now 2% interest will be drawn on this new principal amount for the third month,

 And thus the process will continue,





 And in the next time period, by adding the withdrawn interest and the principal amount, the return becomes a new principal amount, and now the interest is taken back to that new principal amount,

 And this goes on,

 What are the advantages and use of COMPOUND INTEREST

 Interest to the interest taker -

 The biggest advantage of compound interest is that, the amount of interest in it is always changing and increasing, and due to this the interest payer gets more benefit,

 In compound interest, interest is found on the principal only, on the interest which is found, he also gets the benefit of interest,

 use of compound interest

 A lot of money can be made with the better use of compound interest, and can also be lost, if you are going to take compound interest then you get the benefit of money, and if you are about to pay compound interest, then you lose money.  Does matter,

 The compound interest is used by the credit card company,

 And many different banks take interest from compound interest on the loan given by them,

 differ between SIMPLE INTEREST and COMPOUND INTEREST

 The amount of interest in the simple interest is fixed in every time period, while the amount of interest in compound interest varies,

 Remember, the interest rate does not change, only the principal amount changes, the amount of interest changes,

 In Simple Interest, the Principal Amount remains fixed in every time period, while in Compound Interest the Principal Amount keeps changing,

 The calculation of simple interest is quite easy, while the calculation of compound interest is a bit difficult,

 Any kind of loan, loan, lender has more benefit in compound interest than simple interest,

 How is CALCULATE COMPOUND INTEREST done?

 Simple interest calculation

 Simple interest = (Principal x Time x Rate) / 100

 Compound interest –COMPOUND INTEREST CALCULATION

 The following formula is used to calculate compound interest:

 A = P (1 + r / n) (nt)