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CI = P((1+R/100)^T - 1) = 4333.06
FAQ
Common questions and clear answers for this topic.
Compound Interest (CI) is interest calculated on both the principal amount and the accumulated interest from previous periods. Simple Interest (SI) is calculated only on the principal. CI formula: A = P(1 + r/n)^(nt). CI gives more interest than SI for the same principal and rate. Both are important topics for SSC CGL, Bank PO, and CAT exams.
Compound Interest Formula: A = P(1 + R/100)^n where A = Final Amount, P = Principal, R = Annual Rate of Interest, n = Number of years. CI = A - P = P[(1 + R/100)^n - 1]. For half-yearly compounding: A = P(1 + R/200)^(2n). For quarterly: A = P(1 + R/400)^(4n). This formula is essential for SSC CGL and banking aptitude tests.
Annual Compounding: Interest added once a year. Half-yearly Compounding: Rate halved (R/2), time doubled (2n). Quarterly Compounding: Rate quartered (R/4), time quadrupled (4n). Monthly Compounding: Rate divided by 12, time multiplied by 12. More frequent compounding means more interest earned. Understanding this helps solve CI questions in SSC and Bank PO exams.
For half-yearly CI: A = P(1 + R/200)^(2n). Example: P = 10000, R = 10% per annum, n = 2 years. A = 10000(1.05)^4 = 12155. CI = 12155 - 10000 = Rs. 2155. This type of calculation is common in SSC CGL Tier-2 and Bank PO quantitative aptitude sections.
Shortcuts for CI problems: For 2 years CI = SI + SI(R/100), Difference between CI and SI for 2 years = P(R/100)^2, Use net percentage concept for multi-year problems, Remember if rate is 10% CI for 2 years is 21% not 20%, Successive percentage approach helps. Memorize these tricks for quick solving in SSC CGL and IBPS PO exams.
