Compound Interest – Quantitative Aptitude

Quantitative Aptitude – Compound Interest

Preparation for competitive exam will not completed without the learning of Compound Interest. Questions from this chapter is often come in every competitive exams. So it’s a very important chapter to learn.

Learning process of Compound interest is not a very difficult job. It takes few minutes and good concentration to learn. So, concentrate and practice more to become an expert. Now we will discuss basic concept and formulas of Compound interest.

What is Interest ?

Money is not free to borrow. So, when we borrow some money from someone we need to pay some extra money to use the actual money. That extra money is called Interest.

Interest is basically calculate as a percentage on actual borrowed money per year. This means interest will be charged on the money every year at a percentage.

Suppose, Mr. Kumar borrow Rs.20000/- from a bank. He will use that money for 1 year. Now bank charges 10% interest rates on borrowed money. So, how much money Mr. Kumar will pay to the bank after 1 year.

Bank charge in one year is-

20000 X 10% = 2000

So, After one year Mr. Kumar needs to pay the actual amount plus the borrowed fees charged by bank. That is –

20000 + 2000 = 22000

So, Mr. Kumar will pay total Rs.22000/- after one year.

 

Types of Interest

Interest is basically of two types-

• Simple Interest
• Compound Interest

Now here in this page we will discuss Compound Interest. If you want to know more about Simple Interest then please Click Here.

 

What is Compound Interest ?

Definition: When the interest of borrowed money is calculated uniformly for a certain period of time, then the interest is called Compound Interest.

Suppose Mr. Kumar borrowed Rs.20000/- from a bank for 3 years at 10% interest rate. Now if bank chargers compound interest on borrowed money, then Mr. Kumar needs to pay-

Charges for 1st year:

20000 X 10% = 2000

Charges for 2nd year:

20000 X 10% = 2000

Charges for 3rd year:

20000 X 10% = 2000

So, if bank charges 10% interest rates uniformly for 3 years on Rs.20000/-, then Mr Kumar needs to pay Rs.6000/- as interest and total Rs.26000/- after 3 years.

 

Important Formulas

Before discussing the formulas of this topic, you should know few basic terms of interests.

• Borrowed Money = Principal = P
• Rate of Interest = R
• Time = T

Formulas:

• Compound Interest (C.I.) = (P x T x R) / 100

• P = (100 x C.I.) / (R x T)

• T = (100 x C.I.) / (P x R)

• R = (100 x C.I.) / (P x T)

 

So, this is basically the general idea of interest and compound interest. Now if you have any thing to know then please feel free to ask us. We will clarify your doubts here in www.AptitudeTricks.com.