# The same amount of principal is invested

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What would be the total interest paid by Bob? Since compound interest is calculated on the principal and accumulated interest, here's how it adds up:. It can also be determined using the compound interest formula from above:. This example shows how the formula for compound interest arises from paying interest on interest as well as principal.

Interest Rates. Student Loans. Loan Basics. Your Money. Personal Finance. Your Practice. Popular Courses. Personal Finance Financial Literacy. Part of. Ultimate Guide to Financial Education. Part Of. What Is Financial Literacy? Banking Learning About Credit. Handling Debt. Intro to Digital Money. Financial Literacy Tools and Resources. Simple Interest vs. Compound Interest: An Overview Interest is the cost of borrowing money, where the borrower pays a fee to the lender for the loan.

Key Takeaways Interest is the cost of borrowing money, where the borrower pays a fee to the lender for the loan. Compound interest accrues and is added to the accumulated interest of previous periods, so borrowers must pay interest on interest as well as principal.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Find the sum. Calculate the principal amount. The simple interest on a sum of Rs. What will be the amount in Rs.

Rachna borrowed Rs. Exactly one year later she lent this amount to her friend on the same day at the same rate of interest but compounded annually. How much profit or loss will she get at the end of the third year? Find the difference between simple interest and compound interest on Rs. Find that principal amount? Smita took a loan of Rs. She lent that amount to his friend on the same day at the same rate of interest but compounded annually.

How much profit will she make after 2 years? Find the difference between the compound interest and the simple interest on Rs. What is the annual rate of interest? A man invests Rs. What will be the total interest and the total amount in Rs. More Interest Questions Q1. If a sum becomes double in 16 years at simple interest, how many times will it be in 8 years?

A sum of Rs. Find the total compound interest earned in these 3 years. If the difference between the simple interests for 6 years is then find the sum of money invested. A sum becomes double in 4 years at compound interest, in how many years the sum becomes 8 times of itself. If the total simple interest for the 6 years is Rs. Find the sum if the amount after 2 years is Rs.

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