The core formula
Amount = Principal × (1 + Rate/100) raised to the number of years. Compound interest is the amount minus the principal. For two or three years, calculating year by year is often faster than using the formula.
Worked examples
Example 1. 10,000 at 10% for 2 years. Year 1 amount: 11,000. Year 2 amount: 12,100. Compound interest = 2,100.
Example 2. The difference between compound and simple interest for 2 years is P × (R/100)². For 10,000 at 10%, that is 10,000 × 0.01 = 100, matching 2,100 minus 2,000.
Practice path
Revise simple interest first, then use timed sets here. The topic often appears in banking exams and in several management entrance tests.
