How to find out Compound Interest in a QUICK WAY

We all are familiar with the conventional formulae of simple Interest and Compound Interest.

Let us pick up a question do it by conventional method.

• Find the compound Interest on Rs.5000 at 12% per annum for 2 years, compounded annually ?

  Solution:                

P = 5000
R= 12
T = 2 years

Now as you can see that if you go by the formula, it is very tedious task .Instead of using formula, let us learn the quick way to solve this problem, we can go by the percentage concept and get the required answer.We all know that while calculating the compound interest , we get interest not only on the principal amount but also on the previous years’ interest .

Let us find out the total compound interest and understand this technique :

In the first year we get interest only on principal amount

Let us make it in a formula.

Suppose interest for first year be A and interest for second year is B , then the formula could be like:

After getting the percentage of compound interest, we can find out the compound interest from the principal.

Let us try some questions:


• Find the compound interest on a sum 6000 at 15% per annum for 2 years? 

Now with this percentage we can directly find out the compound interest.

Required Compound interest = 32.25% of 6000 =1935

What if the number of years is 3.

• Find the compound interest on a sum of Rs. 9000 at 10% per annum for 3 years. 

So in case if the number of year is 3 we will calculate for 2 years then we will follow the same procedure with 3rd year.