Compound Interest

COMPOUND INTEREST

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Compound interest is calculated on the principal and the interest for the previous period. The principal amount increases with every time period, as the interest payable is added to the principal. This means interest is not only earned on the principal, but also on the interest of the previous time periods. So that the compound interest calculated is more than the simple interest on the same amount of money deposited. Interest is generally calculated on a yearly basis. Sometimes, it can be compounded more than once within a year. It can be compounded half yearly, which means

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BASIC FORMULAE

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1

2

When interest is compounded annually

When interest is compounded half yearly

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 = [ [ 

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] 

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4

When interest is compounded monthly

 = [ [ 

/ 

]

 = [ [ 

 

]

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SHORT TRICKS

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When interest is r1% for 1st year,

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][

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When compound inter ere est is compounded annuall lly y th the e ratio of  

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The Th e di diff ffer eren ence ce D be betw twee een n si simp mple le an and d co comp mpou ound nd in inte tere rest st ac accu cure red d on Rs Rs.P .P at

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1

Find the present worth of Rs.72900 due 2 y ears hence at 8% per annum.

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12

A man borrows Rs.21000 at 10% compound interest. How much he has to pay annually at the end of  each year to settle his loan in two years?

SOLUTION

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13

Find the compound interest on Rs.6000 at 10% per annum for 1.5 years when t he interest is compounded compounde d annually.

SOLUTION

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14

At what rate per annum will Rs.32000 yield a compound interest of Rs.5044 in 9 months interest being compounded compounde d quarterly?

SOLUTION

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15

A sum of money on compound interest amount to Rs.10648 in 3 years and Rs.9680 in 2 years. Find the rate of interest per annum.

SOLUTION

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16

What is the difference between compound interest on Rs.5000 for 1.5 years at 4% per annum according as the interest is compounded yearly or half yearly?

SOLUTION

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17

The difference between the simple interest and compound interest on a certain sum of money for 2 years at 4% per annum is Rs.4. Find the sum.

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18

On a certain sum of money the difference between the compound interest for a year, payable half  yearly and the simple interest for a year is Rs.180. If the rate of interest in both the cases is 10% then find the sum.

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19

The difference between simple interest and compound interest on a certain sum of money for 2 years at 4% per annum is Rs.1. Find the sum of money.

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20

If the compound interest on a certain sum of money for 2 years at 12.5% per annum is Rs.510, find the simple interest on the same sum at the same rate and for the same time.

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21

The compound interest on a certain sum of money invested for 2 years at 5% per annum is Rs.32 find the simple interest on the same sum at the same rate and for t he same time.

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