Compound Interest Shortcut Tricks for 1, 2 & 3 years in pdf
How to solve Compound Interest Problems
If you want to know how to solve Compound Interest Problems quickly (without a calculator), then you are at right place. You will learn Compound Interest shortcut tricks for 2 years and 3 years.
What actually is Compound Interest (CI)
Compound Interest is Interest on Interest. The Interest that is accumulated for the first year is added to the Principal and the next Interest is calculated on the actual Principal plus the Interest occured in the previous year.
Suppose an amount of ₹1000 is given at Compound Interest for 2 years at 5% per annum, then the Interest Compounded yearly will be:
For the 1st year;
CI =5% of ₹ 1000
= ₹50
Then, total sum will amount to ₹1050
For the 2nd year;
CI = 5% of 1050
= ₹ 52.5
Therefore, the total Compound Interest for 2 years will be= ₹ 50 + ₹ 52.50
= ₹102.50
And, this is what we call the Compound Interest and how it is calculated traditionally.
But, many a times this method becomes hazy to follow it because the values given aren’t as simple as mentioned above. For those who are preparing for Competitive examinations its a must to calculate as fast as possible. For making your basic maths calculation faster you can read our lessons on BODMAS and Tricks to learn Divisibility of numbers.
To find Compound Interest, the rate of Interest applicable can be calculated with the help of the following table. These values directly convert the given rate of Interest to the period of the time given in the problem. Further explanation is given with the help of examples.
Compound Interest Shortcut Tricks Table
1^{st} year |
2^{nd} year |
3^{rd} year |
2% |
4.04% |
6.12% |
4% |
8.16% |
12.48% |
5% |
10.25% |
15.76% |
6% |
12.36% |
19.1% |
7% |
14.49% |
22.5% |
8% |
16.64% |
25.97% or 26% |
9% |
18.81% |
29.31% |
10% |
21% |
33.1% |
11% |
23.21% |
36.76% |
12% |
25.44% |
40.49% or 40.5% |
15% |
32.25% |
52.08% |
20% |
44% |
72.8% |
NOTE:
- Some of the % values mentioned above give approximate values not exact values.
- One can determine the answers correctly by looking up to the options given with corresponding question.
Example:
Ques. Find the CI on ₹ 1000 for 2 years at 5% p.a. compounded annually.
Sol: CI rate% for 2 years = 10.25%
Then find 10.25% of the principal
(10.25*1000)/100 = ₹ 102.5
₹ 102.5 is your required compound interest and as far as the amount is concerned here is pretty short method.
Important Point:
- Principal (P) is always 100% of itself.When Compound Interest is added to it then it results to the required Amount.
Example:
Ques. Find amount on ₹ 1000 for 3 years at 10% p.a. compounded annually.
Sol. P = 100%
A = P + CI
= 100 % + 33.1% (CI % for 3 years at 10% p.a. )
A = 133.1% of Principal
Therefore A = (133.1 x 1000)/100 = ₹ 1331
Also attempt: Static General Knowledge Quiz for Banking