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SIMPLE INTREST AND COMPOUND INTREST PROBLEMS AND SOLUTIONS PDF FOR BANKEXAMS 2017

In compound interest, the interest for each period is added to the principle before interest is calculated for the next period. With this method the principle grows as the interest is added to it. This method is mostly used in investments such as savings account and bonds.
To understand compound interest clearly, let’s take an example.
1000 is borrowed for three years at 10% compound interest. What is the total amount after three years?
You can understand the process of compound interest by image shown below.
Compound Interest Concept
Year
Principle
Interest (10%)
Amount
1st
1000
100
1100
2nd
1100
110
1210
3rd
1210
121
1331

Difference between Simple Interest and compound interest

After three years,
In simple interest, the total amount would be 1300
And in compound interest, the total amount would be 1331.

Basic Formulas of Compound Interest

If A = Amount
P = Principle
C.I. = Compound Interest
T = Time in years
R = Interest Rate Per Year
Compound Interest Formula
Compound Interest

Shortcut Formulas for Compound Interest

Rule 1: If rate of interest is R1% for first year, R2% for second year and R3% for third year, then
Compound Interest Shortcut Methods
Example

Rule 2:
If principle = P, Rate = R% and Time = T years then
  1. If the interest is compounded annually:
    Compound Interest
  2. If the interest is compounded half yearly (two times in year):
    Compound Interest Shortcut Formulas
  3. If the interest is compounded quarterly (four times in year):
    Compound Interest Shortcut Methods
Example


Rule 3: If difference between Simple Interest and Compound Interest is given.
  • If the difference between Simple Interest and Compound Interest on a certain sum of money for 2 years at R% rate is given then
    Compound Interest Shortcut Formulas
Example

  • If the difference between Simple Interest and Compound Interest on a certain sum of money for 3 years at R% is given then
    Compound Interest Shortcuts
Example

Rule 4: If sum A becomes B in T1 years at compound interest, then after T2 years
Compound Interest Shortcut Methods
Example

Look up Table
Compound Interest Look Up Table

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