**P** - Principal, the sum of money lent or borrowed.

**R** - Rate of interest: Annual interest, often expressed as a percentage.

**T** - Time period for which the money is lent or borrowed.

**Simple Interest = Principal * Time * Rate of interest / 100**

**SI = P * T * R**

For example, Principal is 4000, Rate of Interest is 8% and Time period is 4 years

SI = 4000× 8% × 4 = 4000× 0.08 × 4

= 1280.

In **compound interest**, the principal amount with interest after the first time period becomes the part of principal for the next time period.

**CI = [P (1 + R/100)^T] – P**

**Total amount = [P (1 + R/100)^T]**

If time period is *half-yearly,*

Amount =** P[1 + (R/2)/100]^2T**

If time period is *quarterly,*

Amount = **P[1 + (R/4)/100]^4T**

For example, Principal is 7500, Rate of Interest is 4% (compounded annually) and Time period is 2 years

Total Amount = [7500×(1+4/100)^2] = 8112.

CI = (8112 - 7500) = 612.