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Monday, 6 July 2015

Simple interest and compound interest Shortcuts for bank PO and Clerk exams

Simple Interest and Compound interest shortcut formulas and trick for bank exams

Every bank exam contains simple interest and compound interest questions.Every candidate can solve these questions.But in bank exams, time management is an important factors.Shortcut formulas play an important role in time management.Here we are sharing important formulas and shortcuts for solving simple interest and compound interest faster.Hope this will save your few valuable minutes during next exam.

Simple Interest

Simple interest is given by the formula I= PRT /100
P=PRINCIPLE R=RATE OF INTEREST per annum T=TIME PERIOD
  • If principle doubles in T years,then R=100/T
  • If principle triples in T years ,then R=200/T
  • if principle becomes  four times in T years,then R=300/T



Compound Interest

Compound interest is given by,
                                  simple interest and compound interest shortcut formulas
 Amount after T years ,
                                      simple interest and compound interest shortcut formulas
  • If rate is R1,R2 & R3 for 1st,2nd and 3rd year respectively then amount is ,
                              simple interest and compound interest shortcut formulas
  • If difference of S.I and C.I is given for 2 years
                             simple interest and compound interest shortcut formulas

Example:Difference between simple interest on certain sum of money for 2 years at 4% and compound interest for same period at same rate is 200.Find the  sum

Ans:Principle=difference*(100/2)^2=200*100/2*100/2=RS 500000.

  • If difference of S.I and C.I is given for 3 years                                  simple interest and compound interest shortcut formulas
  • If amount compounded half yearly R will be replaced by R/2 and T will be replaced by 2T
                                     compound interest
  • If amount compounded quarterly R will be replaced by R/4 and T will be replaced by 4T
                                            simple interest and compound interest shortcut formulas

Eg :Find the compound interest of Rs.10,000 in 9 months at 4%per annum interest payable quarterly.
Rate=4/4=1%,Time period= 9 months=3 quarter years.
simple interest and compound interest shortcut formulas
CI=10,000*((1+1/100)^3 -1)=303.01.
  • If an amount A becomes B in T1 years ,then at T2 years                                        simple interest and compound interest shortcut formulas

Shortcut for finding compound interest 


In some cases evaluation of C.I using formula will be time consuming. Here is an alternate method for calculating compound interest.
Let Principle = P, Compound interest % =  x % per annum , Time period=T
If T=2 , 
Total interest percentage for the first year=x,
Total interest percentage for the second year=x + x% of x= x+ (x*x/100)
Then effective percentage of interest =2x + x*x/100
Then C.I=(2 x + x*x/100) % of P= P*[(2x + x*x/100)/100]

If T=3
Total interest percentage for the first year=x,
Total interest percentage for the second year=x + x% of x= x+ (x*x/100)
Total interest percentage for the third year= x + x % of ( x + x+ x*x/100) =x+ x*( x + x+ x*x/100)/100)
Then effective percentage of interest= x+ x+ (x*x/100) + x+ x*( x + x+ x*x/100)/100)= 3x+ (x*x/100) +x*( 2x + x*x/100)/100)

You may be finding  formulas lengthy, but you will find this method simpler after practicing some problems.Especially if T=2, then this method will be much faster than conventional method using the commonly used formula.
Now let us solve two problems using above method.

Example 1 : What is the compound interest paid on a sum of Rs.3000 for the period of 2 years at 10% per annum.
  1. 630
  2. 620
  3. 610
  4. 600
Solution= Interest % for 1st year= 10
                 Interest % for 2nd year= 10+ 10% of 10= 10+ 10 *10/100=11
                 Total % of interest= 10 + 11=21
                 Total interest = 21 % 3000= 3000 * (21/100)= 630
So, answer is option 1

Example 2:What is the compound interest paid on a sum of Rs.3000 for the period of 3 years at 10% per annum.
  1. 900
  2. 930
  3. 990
  4. 993
Solution= Interest % for 1st year= 10
                 Interest % for 2nd year= 10+ 10% of 10= 10+ 10 *10/100=11
                 Interest % for 3rd year= 10+ 10%(10+11)=10+ 2.1=12.1
                 Total % of interest= 10 + 11+12.1=33.1
                 Total interest = 33.1 % 3000= 3000 * (33.1/100)= 993
So, answer is option 4

Simple interest, compound interest practice questions

1.A man derives his income from an investment of Rs.2000 at a certain rate of interest and Rs.1600 at 2% higher. The whole interest in 3 years is Rs.960. Find the rate of interest.
Answer:8%

2.A man buys a house and pays Rs.8000 cash and Rs.9600 at 5 year credit at 4% per annum simple interest. Find the cash price of the house.
Answer: Rs.16000

3.The simple interest on a certain sum of money for 3 years at 4% is Rs.303.60. Find the compound interest on the same sum for the same period at the same rate.
Answer:315.90

4.If a certain sum given on simple intrest doubles in 20 years. In how many years will it be four times?
Answer:60 years

5.A sum of money placed at compound interest doubles itself in 4 years. In how many years will it amount to 8 times.
Answer:12 years
               
If you need explanation for any of the above practice questions you can comment below.Share this article on  "Simple interest and compound interest Shortcuts for bank PO and Clerk exams" and practice questions of simple interest and compound interest with you friend.Like us on facebook to get more study materials for bank PO and clerk.

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2 comments:

  1. please provide explanation for all questions

    ReplyDelete
  2. please provide explanation for all questions

    ReplyDelete

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