Chapter 2 · ICSE Class 9 Mathematics (Selina Concise)

Compound Interest [Basic Concepts]

Understand how compound interest builds on itself year after year, and calculate the amount and interest using the basic year-by-year method.

💰 Chapter 2

Compound interest growing an investment over three years A curve showing an investment growing faster each year under compound interest, compared to a straight dashed line showing what simple interest growth would look like Compound Simple Years →
2.1

Calculating Compound Interest Year by Year

Unlike simple interest, compound interest is calculated on the accumulated amount (principal + previous interest), not just the original principal.

1

₹5,000 is invested at 10% per annum compound interest. Find the amount after 2 years.

Year 1: 5000×1.10=5500; Year 2: 5500×1.10=6050; amount=₹6,050

2

Find the compound interest on ₹8,000 for 2 years at 5% per annum.

Year 1: 8000×1.05=8400; Year 2: 8400×1.05=8820; CI=8820−8000=₹820

3

₹12,000 is invested at 8% per annum compound interest. Find the amount after 2 years.

Year 1: 12000×1.08=12,960; Year 2: 12960×1.08=13,996.80; amount≈₹13,996.80

2.2

Comparing Compound Interest and Simple Interest

Compound interest is always greater than or equal to simple interest for the same principal, rate, and time (beyond 1 year), because interest earns interest.

1

Find the difference between CI and SI on ₹4,000 for 2 years at 10% per annum.

SI=4000×10×2/100=800; CI: Year1=4400, Year2=4840, CI=840; difference=840−800=₹40

2

Why is CI always ≥ SI for the same values?

Because CI is calculated on a growing base (principal plus prior interest), while SI is always calculated on the fixed original principal

3

Find the difference between CI and SI on ₹6,000 for 2 years at 5% per annum.

SI=6000×5×2/100=600; CI: Year1=6300, Year2=6615, CI=615; difference=615−600=₹15

Practice

Exercises

1. ₹6,000 is invested at 10% per annum compound interest. Find the amount after 2 years.

2. Find the compound interest on ₹10,000 for 2 years at 8% per annum.

3. Find the difference between CI and SI on ₹5,000 for 2 years at 8% per annum.

4. ₹2,500 is invested at 20% per annum compound interest. Find the amount after 2 years.

5. Find the compound interest on ₹12,000 for 2 years at 5% per annum.

6. ₹7,500 is invested at 4% per annum compound interest. Find the amount after 2 years.

7. Find the compound interest on ₹15,000 for 2 years at 6% per annum.

8. Find the difference between CI and SI on ₹9,000 for 2 years at 10% per annum.

9. ₹4,000 is invested at 15% per annum compound interest. Find the amount after 2 years.

10. Find the compound interest on ₹20,000 for 2 years at 7% per annum.

Next chapter — Compound Interest [Applications] 📈 →