Difference Between Simple Interest (SI) and Compound Interest (CI)
SSC GD Exam Preparation - Quantitative Aptitude
🔹 1. Basic Definition
Simple Interest (SI)
Interest is calculated only on the principal throughout the time period.
Compound Interest (CI)
Interest is calculated on principal + accumulated interest (i.e., interest on interest).
🔹 2. Formula Comparison
| Interest Type | Formula | Meaning |
|---|---|---|
| Simple Interest (SI) | SI = (P × R × T) / 100 | Interest remains constant every year |
| Compound Interest (CI) | A = P(1 + R/100)T CI = A - P |
Interest increases every year due to compounding |
🔹 3. How Interest Grows?
SI:
Interest does not change every year.
Example:
On ₹1000 at 10% → Interest every year = ₹100
CI:
Interest keeps increasing every year.
Example:
On ₹1000 at 10%:
- • Year 1: ₹100
- • Year 2: Interest on ₹1100 = ₹110
- • Year 3: Interest on ₹1210 = ₹121
🔹 4. Key Differences (Easy Table)
| Basis | Simple Interest (SI) | Compound Interest (CI) |
|---|---|---|
| Calculation | Only on principal | On principal + interest |
| Interest per year | Same every year | Increases every year |
| Total Amount | A = P + SI | A = P(1 + R/100)T |
| Growth | Linear | Exponential |
| Return | Lower | Higher |
| Used in | Loans, EMI, bank deposits | Investments, credit cards, business loans |
🔹 5. Small Example to Show the Difference
If P = ₹1000, R = 10%, T = 2 years:
Simple Interest
SI = (1000×10×2)/100 = ₹200
Amount = 1000 + 200 = ₹1200
Compound Interest
A = 1000(1.10)² = 1000 × 1.21 = ₹1210
CI = 1210 − 1000 = ₹210
👉 Difference = 210 − 200 = ₹10
🧠 Practice Section: 10 Practice Questions (With Answers)
Test your understanding of SI vs CI with these SSC GD level practice questions. Click on "View Answer" to check your understanding.
Q1. SI on ₹5000 at 8% for 2 years = ?
View Answer
800
Q2. CI on ₹5000 at 8% for 2 years = ?
View Answer
866 (Using A = 5000 × 1.1664)
Q3. Find difference between CI and SI on ₹4000 at 10% for 2 years.
View Answer
Difference = P(R/100)² = 4000(0.1²) = ₹40
Q4. CI on ₹2000 at 5% for 1 year = ?
View Answer
100 (A = 2000 × 1.05 = 2100 → CI=100)
Q5. SI on ₹3000 at 6% for 3 years = ?
View Answer
540
Q6. CI on ₹3000 at 6% for 3 years (yearly compounding) = ?
View Answer
A = 3000 × (1.06)³ = 3000 × 1.191016 = ₹3573.05, CI = 573.05
Q7. If SI for 2 years is ₹500 at 5%, find P.
View Answer
SI = PRT/100, P = 500×100 / (5×2) = ₹5000
Q8. If CI for 2 years on ₹2500 at 10% is ₹525, find amount.
View Answer
Amount = 2500 + 525 = ₹3025
Q9. If Principal = ₹1500, CI = ₹93.15 for 1 year (compounded half-yearly). Find rate per half-year.
View Answer
A = 1500 + 93.15 = 1593.15, 1593.15 = 1500(1+R/100)², R = 3% per half-year (≈6% yearly)
Q10. SI for 3 years at 4% is ₹480. Find amount.
View Answer
SI = 480, Principal = SI ×100 / (4×3) = 480×100/12 = 4000, Amount = 4000 + 480 = ₹4480
✅ SSC GD Exam Strategy
🟢 Understand the fundamental difference between SI and CI
🟢 Remember CI grows faster due to compounding effect
🟢 Master the CI-SI difference formula for quick calculations
🟢 Practice identifying when to use SI vs CI in problems
🟢 Time yourself - aim for 30-45 seconds per comparison question
You've completed SI vs CI Concepts!
SSC GD Tip: Understanding the difference between Simple and Compound Interest is crucial for quantitative aptitude. Remember that SI gives linear growth while CI gives exponential growth. The key difference comes from the "interest on interest" effect in compound interest. Practice the CI-SI difference formulas and understand when each type is typically used in real-life scenarios. Regular practice with previous year SSC GD questions will help you quickly identify and solve SI vs CI problems efficiently.
Master SI & CI Differences for SSC GD Exam!
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