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100 FAQ's on Basic Finance

Module Units

What is the difference between return and interest?

Return: The percentage of loss & gain generated by an investment in return. A return is an internal measure to the investor. 

 

Formula: Ending value of investment - Beginning value of investment / Beginning Value of investment x 100

 

Interest: The cost of borrowing or lending money is interest. Interest is an external measure that relates to the cost of getting money from a lender. 

 

Simple interest formula is given:    


         SI = (P × R ×T) / 100


where 
SI = simple interest
P = principal
R = interest rate (in percentage)
T = time duration (in years)

 

The compound interest formula is given as:  


       A = P(1+R/n)nt


Where,
A = amount
P = principal
R = rate of interest
n = number of times interest is compounded per year
t = time (years)

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Units 14/101