Question:
Is compound intrest equal to simple intrest if time is 1 year and compounded anually
Answer:
Let P is the principle, R is the rate of interest and T is the time.
Again let P = 100, R = 10% and T = 1(given)
Now, Simple interest (SI) = (P * R * T)/100
=> SI = (100 * 10 * 1)/100
=> SI = 1000/100
=> SI = 10
Again Compund interest (CI) = P*(1 + R/100)T - P
=> CI = 100 *(1 + 10/100)1 - 100
=> CI = 100 *(1 + 1/10) - 100
=> CI = 100 *{(10 + 1)/10} - 100
=> CI = 100 *(11/10) - 100
=> CI = 1100/10 - 100
=> CI = 110 - 100
=> CI = 10
So, SI = CI = Rs 10
Hence, compound interest equals to simple intrest if time is 1 year and compounded anually.
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