Patwari Exam · Reasoning
Simple & Compound Interest
This note explains simple interest and compound interest formulas, the Rule of 72, and the difference between them.
- Reasoning & Numerical Ability
- 5 min read
Verified 6 October 2026
Key Formulas & Methods
- Simple interest formula
- Simple interest (SI) = (principal × rate × time) / 100; formula: SI = PRT/100.
- Amount formula
- Amount = principal + interest = P(1 + RT/100).
- Compound interest formula
- Compound interest (CI): A = P(1 + r/100)ⁿ; CI = A − P.
- CI-SI difference
- Difference between CI and SI over 2 years = P(r/100)².
- Worked example
- Example: ₹1000, 10%, 2 years → SI = 200; CI = 1000×(1.1)² − 1000 = 210 → difference = 10.
- Rule of 72
- Rule of 72: years to double an amount ≈ 72/interest rate.
- Exam tip
- Exam tip: in CI calculations, the principal changes every year — keep this in mind.
Frequently Asked Questions
What is the formula for finding simple interest (SI)?+
Simple interest SI = (principal × rate × time)/100.
How do you find compound interest (CI)?+
In compound interest, the amount A = P(1 + r/100)ⁿ, and CI = A − P; e.g. on ₹1000 at 10% for 2 years, CI = 210.
What is the Rule of 72 used for?+
The Rule of 72 estimates the number of years for an amount to double as ≈ 72/interest rate.