Hello everyone, welcome back to our new video.
In today's video, we are going to talk about Simple
Interest and Compound Interest.
In last videos, we had discussed about Profit and Loss.
And before that, we had discussed about Percentage.
By using those topics, we will discuss about Simple
Interest and Compound Interest.
First of all, let us understand about Simple Interest and
Compound Interest.
Interest means interest.
Suppose you deposit money in a bank.
The money you are getting on that money, or whatever
percentage you are getting.
The extra money you are getting on that money, that would
be your interest or interest on that principal money.
Whatever you have invested or you have lent to someone.
This is our interest.
We have two types of interest.
That is Simple Interest and the other is Compound Interest.
Simple Interest, as the name suggests, it would be simple
only.
Let us understand what is Simple Interest.
I will write the formula of Simple Interest later.
First, let me give you an example of what is the difference
between both.
Suppose we have two friends.
One is a girl.
Let us suppose her name is Anu.
And there is a boy whose name is Rahul.
These two are friends.
Both of them have 1000 rupees.
Anu has 1000 rupees.
And Mr. Rahul has 1000 rupees.
Both of them are friends.
So, both of them think that let us save our money.
So, both of them save their money.
Let us say, they have deposited their money in a small bank
or a nearby place.
Now, on what condition have they deposited their money?
On the condition that they get the interest rate per year.
Now, what is the interest rate?
Interest rate means, if we are giving money to someone and
we take interest from him, then we will give him a
particular value or a particular percentage.
For example, someone will give 1% and someone will give 10%.
So, what is this percentage for?
The principal amount that they have deposited or lended,
they will get 10% of that amount.
So, per year, the money that they have deposited, this is
our principal.
And per year means, in one year, the rate of interest that
they have deposited, what is the rate of interest that they
have deposited?
Let us suppose, they have deposited 10% per annum on the
rate of interest.
So, on one side is Rahul and on the other side is Anu.
So, they have deposited Rs.1000 in the bank and what are
they getting every year?
They are getting 10% extra money, i.e. interest.
Now, the expenses of the girls.
So, Anu said that, what I do is, whenever I get interest,
I will take that interest and buy something else.
So, girls get money from somewhere, so will they buy makeup
or shopping?
But on the other side, Rahul decides that he will save his
money, he will save the interest that he will get for his
future.
So, this is decided between the two.
Now, if we see the picture after one year, after one year,
after one year, the money that Anu will get with the
interest, what will that be?
Rs.1000 will be there in her account, because she had
deposited that money.
Plus, what will she have other than Rs.1000?
Plus, 10% of the interest that she has got, 10% of what?
Whatever she has deposited.
That is 10% of her principal money.
So, now the money that she has in the bank, how much is
that? Rs.1000.
Plus, the interest that she has got, take out 10% of
Rs.1000.
We have learnt it well in percentage.
10% of Rs.1000, so, this will be 1 by 100 of Rs.1000. 0 to
0, that would be Rs.100.
So, what is Rs.100?
It is her interest.
How much interest did she get?
Rs.100.
The interest that she got,
Rahul will also get the same, because he has also deposited
the same amount in the same rate of interest. So, now how
much money is there in her bank?
Rs.1000 plus Rs.100.
This is his interest money.
So, he said that he will save it, he will not even touch it.
He kept it as it is.
So, now he has Rs.1100.
But, I said that he has to take money for shopping.
So, he withdrew his interest money.
So, now the money that he has, when he withdrew his
interest, so, the leftover money that he has in his
account, that is Rs.1000 as it is. Neither did he increase
nor did he decrease.
So, Rs.1000 is in his bank as it is.
Whereas, how much money does Rahul have in his account?
That is Rs.1100.
When did all this happen?
After one year.
This is what he has after one year.
So, what did he have after one year?
Let me write it again.
This is Anu.
This is Rahul.
So, initially, he also had Rs.1000.
And, he also had Rs.1000.
Now, after one year, first year means, how much did he have
after one year? Rs.1000 plus Rs.100.
And, he also had Rs.1000 plus Rs.100.
But, he saved his money.
So, the money that he has now is Rs.1100.
And, he withdrew his money.
So, the money that he has after one year, is the same as it
is. It is Rs.1000.
Now, if two years have passed, one year has passed,
similarly, the second year will also come. Meaning, the
second year will also come.
So, what is happening in the second year? Now, Anu will get
the interest rate.
The interest rate is the same for both.
That is 10% of the money.
Whatever is their principal money in the bank.
So, Anu has Rs.1000.
So, the interest that he will get now, how much will he
get? 10% of this Rs.1000, we just withdrew it.
How much did you get?
Rs.100.
This is his second year's interest.
That is Rs.100.
This is your interest.
And, this is also your second year's interest.
Same goes for Rahul.
He will also get 10% interest.
But, there will be a difference.
Now, the 10% that he will get, he will not get it on the
basis of Rs.1000.
He will not get 10% of Rs.1000.
Now, on the basis of Rs.1100, he will get 10%.
Because, he has so much money in his bank account.
So, whatever money he had, he would have got 10%.
So, what will happen to Rahul after his second year?
Rs.1100 plus 10% of Rs.1100.
Did you understand this?
This is your difference point.
In the first year, both of them had the same interest.
10% of their principal amount.
So, 10% of principal amount.
So, in the first year, both of them had the same interest.
That was Rs.100.
But, in the second year, So what happened in the second
year, his interest is 100 rupees, but Rahul's interest is
10% of this, that is 110 rupees. Interest is 110 rupees.
Whatever you see is obviously more than 100 rupees.
So he played smart that he did his saving, so he got more
interest on saving, whereas she decided to withdraw her
interest money and spend it for shopping or etc.
So now she will withdraw 100 rupees, so now leftover will
remain in 1000, so left over will remain in 1000 only, and
now how much total money he has, he will have, we will add
interest, so he will have 0, 1, 2, 1, so 1210 rupees, Rahul
has after second
year, and he has 1000 rupees, because he is withdrawing his
interest.
Now similarly you can do for next years also, for third
year, let me tell you about last year, in third year again
he will get 100 rupees plus interest, so now in third year
also his interest is 100 rupees only, whereas now Rahul's
interest will be 1210
plus 10% of 1210, that is rupees 1210 plus rupees 121, so
now his interest after third year will be 121, whereas
Anu's interest is 100 rupees, so this is the difference,
this Anu's case, in this every year same interest was
coming, that is 100 rupees,
100 rupees and 100 rupees, so this will be the case of
simple interest, this would be case of simple interest, so
this interest which is coming, which is same every year,
that is simple interest, and this which is different every
year, like first year
100, next year Rahul got 110 rupees, then third year he got
121 rupees, so this different interest, which case is this,
compound
interest, so you understood the difference between simple
interest and compound interest, one more thing, in simple
interest you see principal money, means on which we are
calculating rate of interest, or the money which we have
invested or deposited,
that you have same 1000, 1000, 1000, every year you are
finding out 10% of that 1000 for the interest, whereas in
the case of Rahul, you see first year 1000, then second
year his principal amount is now
1100, so the 10% which you found out, you found out on new
principal amount, not 1000, the new principal amount which
you found out, we will come to that later, because we call
it as amount, so you found out 10% of that, then in third
year the new amount
which you found out, you found out 10% of that, instead of
the original, starting principal money, instead of finding
out that, you took new new principal values and found out
10% of that, what happened to that, interest came, so this
is your in short,
difference between simple and compound interest, now in
next video what we will do, we will do their formulas and
question, we will keep this video short, just for the
difference of these two interest, thank you for watching
the video.
Thank you for watching the video.