COMPOUND INTEREST

IMPORTANT FORMULAE :-

Let,     Principal = p
           Time = n years
           Rate = r % per annum

CASE 1 :-  When compound interest is annually.

                Amount = $p  \left ( 1+\frac{r}{100} \right )^{n}$

CASE 2 :-  When compound interest is half yearly.

                Amount = $p  \left ( 1+\frac{\frac{r}{2}}{100} \right )^{2n}$

CASE 3 :-  When compound interest is quarterly.

                Amount = $p  \left ( 1+\frac{\frac{r}{4}}{100} \right )^{4n}$

CASE 4 :-  When rate of interest is $r_{1}\, \%,\, r_{2}\, \%\, and\, r_{3}\, \%$ for 1st year, 2nd year and 3rd year respectively,
Then,

          Amount = $p\left ( 1+\frac{r_{1}}{100} \right )\times \left ( 1+\frac{r_{2}}{100} \right )\times \left ( 1+\frac{r_{3}}{100} \right )$


Example 1:-  Find the compound interest on Rs 10000 in 2 years at 4 % per annum, the interest being compounded half-yearly?
Sol.     
          Principal = Rs 10000
          Rate = 2 % per half-yearly
          Time = 2 years = 4 half-years

  $\therefore$  Amount = $10000\times \left ( 1+\frac{2}{100} \right )^{4}$

                                     = $\left ( 10000\times \frac{51}{50}\times \frac{51}{50}\times \frac{51}{50}\times \frac{51}{50} \right )$

                                     = Rs 10824.32
                        $\therefore$   C.I. = Rs (10824.32 - 10000)
                                     = Rs 824.32

Example 2 :-  Find compound interest on Rs 8000 at 15 % per annum for 2 years 8 months, compounded annually?
Sol.
         Principal = Rs 8000
         Rate = 15 %
         Time = 2 years 8 months  = $2\frac{8}{12}$ years = $2\frac{2}{3}$

                        Amount = $8000\times \left ( 1+\frac{15}{100} \right )^{2}\times \left ( 1+\frac{\frac{2}{3}\times 15}{100} \right )$

                                      = $\left ( 8000\times \frac{23}{20}\times \frac{23}{20}\times \frac{11}{10} \right )$

                                      = Rs 11638
                         $\therefore$   C.I. = Rs (11638 - 8000)
                                      = Rs 3638

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