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Compound Interest

 

Important formulae and tricks and shortcuts of Compound Interest:

We are providing you Important Concepts and Tricks on Compound Interest which are usually asked in almost all competitive exams like IBPS, Govt. Exams and CAT and in quantitative aptitude of MNCs. Use these below given tricks to solve questions within minimum time. These tricks will be very helpful for your upcoming Competitive Exam.

 

In following  formulae and tricks results, we use the following denotations:

A = future value
P = principal amount (initial investment)
r = annual nominal interest rate
n = number of times the interest is compounded per year
t = number of years for which the money is borrowed

Let’s get started and cover some of these tricks and shortcuts.

Compound Interest Trick 1:

1. A sum of money placed at compound interest becomes x time in ‘a’ years and y times in ‘b’ years. These two sums can be related by the following formula:

Derivation for this result:


We use the basic formula for calculating Compound Interest:

For condition 1, a sum of money becomes x times in “a” years.
Therefore, using the formula for calculating Compound Interest:

Compound Interest Trick 2:

2. If an amount of money grows up to Rs x in t years and up to Rs y in (t+1) years on compound interest, then

Derivation for this result:

Principal + CI for t years = x ……   (1)
Principal + CI for (t+1) years= y  …….  (2)
(2) – (1) =>CI for last year = y-x
Which is basically the simple interest upon x

Compound Interest Trick 3:

3. A sum at a rate of interest compounded yearly becomes Rs. A1 in n years and Rs. A2 in (n + 1) years, then

Compound Interest Trick 4:

4. If a certain sum becomes x times of itself in t years, the rate of compound interest will be equal to

Derivation for this result:

Use the formula for Compound Interest Calculation:

Sum becomes x times of itself in t years so

Compound Interest Trick 5:

5. If the compound interest on a certain sum for 2 years is CI and simple interest for two years is SI ,then rate of interest per annum  is 

Derivation for this result:

For solved problems on above formulas please visit below sections: