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Compound Interest Notes

The document outlines rules for calculating compound interest, including formulas for different compounding frequencies and scenarios with varying interest rates. It also provides methods to determine the difference between compound and simple interest, as well as how to calculate annual installments for borrowed sums. Additionally, it includes rules for determining the rate of interest based on the growth of a sum over specified time periods.

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mitinyasha50
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109 views1 page

Compound Interest Notes

The document outlines rules for calculating compound interest, including formulas for different compounding frequencies and scenarios with varying interest rates. It also provides methods to determine the difference between compound and simple interest, as well as how to calculate annual installments for borrowed sums. Additionally, it includes rules for determining the rate of interest based on the growth of a sum over specified time periods.

Uploaded by

mitinyasha50
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as TXT, PDF, TXT or read online on Scribd

-: COMPOUND INTEREST:-

Rule 1. If A = Amount, P = Principal, r = Rate of Compound Interest (C.I.), n = no.


of years then,
A = P(1 + r / 100)n , C.I = A - P
C.I = P[(1 + R / 100)n -1 ]
Rule 2. Compound interest is calculated on four basis:
Rate Time(n)
Annually r% t years
Half-yearly r/2% t × 2 years
(semi-annually)
Quarterly r/4% t × 4 years
Monthly r/12% t × 12 years
RULE 3: If there are distinct ‘rates of interest’ for distinct time periods i.e.,
The rate for 1st year → r1%
Rate for 2nd year → r2%
Rate for 3rd year → r3% and so on
Then A = P(1+r1/100)(1+r2/100)(1+r3/100)..............
C.I = A - P
Rule 4. If the time is an fractional form i,e.
t = nF, then
A = P(1 + R / 100)n (1+ rF / 100 ) e,g. t = 3 5⁄7 yrs, then.
A = P(1 + r / 100)3 (1 + r / 100 × 5/7)
Rule 5. A certain sum becomes 'm' times o itself in 't' years on compound interest
than the time itself in 't' years on compound interest then the time it will take
to become "m" times of itself is t×n years.
Rule 6. The difference between C. I and S, I on a sum 'P' in 2 years at the rate of
R% rate of compound interest will be
C.I - S.I = P( R / 100)2 = (S.I × R )/200
For 3 years C.I - S.I = P(R/100)2 × (3+R/100)
Rule 7. If on compound interest, a sum become ? A in 'a' years and ? B in 'b' years
then,
(i) If b - a = 1, then R% = (B/A-1) × 100%
(ii) If b - a = 2 then R% = (√B/A - 1) × 100%
(iii) If b - a = n then R% = [(B/A)1/n - 1] × 100%
where n is a whole number.
Rule 8. If a sum becomes 'n' times of itself in 't' years on compound interest,
then R% =
[n1/t - 1]× 100%
Rule 9. If a sum 'P' is borrowed at r% annual compound interest which is to be paid
in 'n' equal annual installments including interest, then
(i) for n = 2 , Each annual installment
P/{(100/100+r)+(100/100+r)2}
(ii) For n = 3 Each annual installment
P/{(100/100+r)(100/100+r)2+(100/100+r)3}
Rule 10. The simple interest for a certain sum for 2 years at an annual rate
interest R% is S.I, then C.I = S.I (1+R/200)
Rule 11. A certain sum at C.I becomes x times in n1 years and y times in n2 years
then
x1/n1 = y1/n2
-:-☀-☀-☀-☀-:-

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