Commercial Mathematics

• Interest is the extra money paid by institutions such as banks or post offices on money deposited with them.

It is also paid by people when they borrow money from these institutions.

Amount = Principal + Interest

• The interest calculated on the amount of the previous year (or duration at which interest is compounded) is known as compound interest. Compound interest allows the principal to grow faster than simple interest.

• Amount (A) when interest is compounded annually is where, P = Principal, R = Rate of interest, n = Time period.

For example, if Supriya invested Rs 75000 in a bank at the rate of 10% per annum for 2 years then the amount received by her can be calculated as follows:

Here, P = Rs 75000, R = 10%, n = 2 years

= Rs 90750

Thus, Supriya received Rs 90750 after 2 years.

• Amount when…