Tips And Tricks And Shortcuts To Solve Compound Interest

Tips and Tricks and Shortcuts on Compound Interest

Here, are quick and easy tips and tricks on Compound Interest. Learn the tricks and concept of compound interest.

  • There are mainly 5 types of questions asked in exams. However, these questions can be twisted to check the students understanding level of the topic but it can be solved using tips and tricks.

Compound Interest Tricks and Tips and Shortcuts

  • 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:
    (x)1/a = (y)1/b
  • 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
    r% = (y-x)/x * 100
  • A sum at a rate of interest compounded yearly becomes Rs. A1 in t years and Rs. A2 in (t + 1) years, then
    P = A1(A1/A2)t
tricks and tips and shortcuts on compound interest

Type 1: Tips and Tricks to find the compound interest (Yearly, Quarterly, and Half-yearly)

Question 1.

Find the amount if Rs 50000 is invested at 10% p.a. for 4 years
Options:

A. 73205
B. 7320.5
C. 73250
D. 73502

Solution:

We know that, Amount = P (1+r/100)t
A = 50000 (1 + 10/100)4
A = 50000 (1.1)4
A = 73205

Correct option: A

Type 2: Tips and Tricks and Shortcuts for Compound Interest (To find the Rate of Interest, Time period, Principal)

Question 1.

The Compound Interest on a sum of Rs 576 is Rs 100 in two years. Find the rate of interest.

Options:

A. 7.33%
B. 4.33%
C. 8.33%
D. 5.33%

Solution:

We know that,
Amount = Compound Interest + Principal
A = 576 + 100 = 676
Amount = P (1+r/100)t
676 = 576 (1+ r/100)2
676/576 = (1+ r/100)2
(26/24)2 = (1+ r/100)2
(26/24) = (1+ r/100)
(26/24 – 1) =r/100)
1.0833 – 1 = r/100
0.0833 = r/100
r = 8.33%

Correct option: C

Type 3: Tips and Tricks to Find sum or rate of interest when compound interest and S.I are given

Question 1.

The difference between the CI and SI on a certain amount at 14% p.a. for 2 years is Rs. 100. What will be the value of the amount at the end of three years if compounded annually?

Options:

A. 7558.89
B. 7500.45
C. 7558
D. 7554.56

Solution:

We know that, Difference between CI and SI = P(R2)/(1002)
100 = P(142)/(1002)
P = (100*1002)/142
P = 1000000/196
P = 5102.04
Now calculate the CI on Rs. 5102.04
A = 5102.04 (1+14/100)3
A = 5102.04 (114/100)3
A = 5102.04 * 1.48
A= 7558.89

Correct option: A

Type 4: Shortcuts of Compound Interest (When sum of money becomes x time in ‘a’ years and y times in ‘b’ years.)

Question 1.

A sum of money placed at compound interest doubles itself in 8 years. In how many years will it amount to 32 times itself?

Options:

A. 40 years
B. 50 years
C. 32 years
D. 35 years

Solution:

We know that,
(x)1/a = (y)1/b
2(1/8) = 32(1/x)
2(1/8) = 2(5/x)
1/8 = 5/x
x = 40 years

Correct option: A

Type 5: Tips and Shortcuts for Compound Interest (When Rates are different for different years)

Question 1.

Find the compound interest on a sum of money of Rs.10000 after 2 years, if the rate of interest is 2% for the first year and 4% for the next year?
Options:

A. Rs. 304
B. Rs. 608
C. Rs. 1000
D. Rs. 710

Solution:

We know that,
Amount = P (1+r1/100) (1+r2/100) (1+r3/100)
Here, r1 = 2% r2 = 4% and p = Rs.10000,
CI = A – P
CI = 10000 (1 + 2/100) (1 + 4/100) – 10000
CI = 10000 * (102/100)(104/100) – 10000
CI = 10000 * (51 * 52/2500) – 10000
CI = 10000 * (2652 / 2500) – 10000
CI = 10000 * (1.06) – 10000
CI = 10608 – 10000
CI = 608
Hence, the required compound interest is Rs. 608.

Correct option: B

Please Login/Signup to comment