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Compound Interest

Compound Interest

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01/05/2014

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Compound Interest
Important Facts And Formula
1.
 
Let Principal = P, Rate = R% per annum, Time =
n
years
.
 2
.
 
When interest is compound Annually:
 Amount = P
1
+
n
 
100
 3
.
 
When interest is compounded Half-yearly:
 Amount = P
1
+(R/2)
2
n
 
100
 4
.
 
When interest is compounded Quarterly:
 Amount = P
1
+(R/4)
4
n
 
100
 5
.
 
When interest is compounded Annually but time is in fraction, say 3 years.
 Amount = P
1
+3x
1
+
100
 
100
 6
.
 
When Rates are different for different years
, say R 
1
%, R 
2
%, R 
3
% for 
1
st
, 2
nd
and 3
rd
year respectively
.
 Then, Amount = P
1
+
1
 
1
+
2
 
1
+
3
 
.
 
100
 
100
 
100
 7
.
 
 P 
resent worth of Rs. x due n years hence is given by:
 Present Worth =
 x
 
.
 
1
+
100
 
 
 
1.
A bank offers 5% compound interest calculated on half-yearly basis
.
A customer deposits Rs
.
 
1
6
00
each on
1
st
January and
1
st
July of a year 
.
At the end of the year, the amount he wouldhave gained by way of interest is:A
.
 
Rs
.
 
1
2
0
 B
.
 
Rs
.
 
1
2
1
 C
.
 
Rs
.
 
1
22D
.
 
Rs
.
 
1
23
Answer:
Option
B
 
Explanation:
 Amount= Rs
.
 
1
6
00
x
1
+52+
1
6
00
x
1
+52 x
100
2 x
100
 = Rs
.
 
1
6
00
x4
1
 x4
1
 +
1
6
00
x4
1
 4
0
4
0
4
0
 = Rs
.
 
1
6
00
x4
1
4
1
 +
1
 4
0
4
0
 = Rs
.
 
1
6
00
x 4
1
x 8
1
 4
0
x 4
0
 = Rs
.
332
1.
 C
.I.
= Rs
.
(332
1
- 32
00
) = Rs
.
 
1
2
1
 2
.
The difference between simple and compound interests compounded annually on a certainsum of money for 2 years at 4% per annum is Re
.
 
1.
The sum (in Rs
.
) is:A
.
 
625B
.
 
63
0
 C
.
 
64
0
 D
.
 
65
0
 
Answer:
Option
A
 
Explanation:
 Let the sum be Rs
.
 
 x
.
Then,C
.I.
=
1
+42-
 x
=676-
 x
=5
1
 
.
 
100
625 625S
.I.
=x 4 x 2=2
 x
 
.
 
100
255
1
 x
- 2
 x
=
1
 
 
625 25
 x
= 625
.
 3
.
There is 6
0
% increase in an amount in 6 years at simple interest
.
What will be the compoundinterest of Rs
.
 
1
2,
000
after 3 years at the same rate?A
.
 
Rs
.
2
1
6
0
 B
.
 
Rs
.
3
1
2
0
 C
.
 
Rs
.
3972D
.
 
Rs
.
624
0
 E
.
 None of these
Answer:
Option
C
 
Explanation:
 Let P = Rs
.
 
100.
Then, S
.I.
Rs
.
6
0
and T = 6 years
.
 R =
100
x 6
0
 =
10
% p
.
a
.
 
100
x 6 Now, P = Rs
.
 
1
2
000.
T = 3 years and R =
10
% p
.
a
.
 C
.I.
 = Rs
.
 
1
2
000
x
1
+
10
 3-
1
 
100
 = Rs
.
 
1
2
000
x33
1
 
1000
 = 3972
.
 4
.
 What is the difference between the compound interests on Rs
.
5
000
for 
1
years at 4% per annum compounded yearly and half-yearly?A
.
 
Rs
.
2
.0
4B
.
 
Rs
.
3
.0
6C
.
 
Rs
.
4
.
8
0
 D
.
 
Rs
.
8
.
3
0
 
Answer:
Option
A
 
Explanation:
 C
.I.
when interestcompounded yearly= Rs
.
5
000
x
1
+4x
1
+x 4
100
 
100
 = Rs
.
5
000
x26x5
1
 25 5
0
 = Rs
.
53
0
4
.
 

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