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Simple Interest and Compound Interest for IBPS PO

Nov 24 • Bank, Maths Notes • 735 Views • No Comments on Simple Interest and Compound Interest for IBPS PO

Simple Interest and Compound Interest for IBPS PO

Simple Interest and Compound Interest for IBPS PO, BANK, SBI PO and government exam.

Interest (I): the additional amount paid by the borrower to the lender for the use of a sum of money

Principal (P): the sum of money lent, borrowed or invested

Time (T): the duration for which the sum of money is lent or invested, usually in years

Rate (R): the interest paid on Rs. 100 per unit of time, usually per an num (p.a.)

Amount (A): the sum of principal and the interest

Simple interest: the interest paid on the original sum of money borrowed or invested

                   S.I. =Principal × Rate × Time /100        i.e.                I = T/100

                

           Amount = principal + interest                i.e.                A = P + I

When we say, interest , it always means simple interest.

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Compound interest: money is said to be lent at compound interest, when the interest, which has become due at the end of a certain fixed period (one year, half year, etc., as given), is not paid to the money lender , but is added to the sum lent. The amount thus obtained becomes the principal for the next period. This process is repeated until the amount for the last period is found.

The difference between the final amount and the original principal is the required compound interest  i.e.

Simple Interest and Compound Interest for IBPS PO

                  Compound Interest = Final Amount – Original Principal

The formula for finding the amount is

      A = P(1 +r/100)t   

      And C.I. = A – P

Where A = amount

           P = principal

           r = rate of interest compounded yearly

           t = numbers of years

 When the rate for successive years are different, then

  A = (1 + r1/100 ) (1 + r2/100) (1 + r3/100)……………

       Where r1 %, r2%, r3% …………………. Are the rates for successive years .   

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Short tricks

  • The difference between compound interest and simple interest for some amount of money in 2 years  is =R2/10000
  • When the interest is compounded half yearly and rate of interest annually, then the amount will be after t years,   A = P(1 +r/100×2)t×2
  • When the interest is compounded yearly and time is 1 1/years, then amount will be    A= P(1 +r/100)(1 +r/100*2)1
  • The compound interest for 2 years  in terms of interest is , C.I. = I +  r/100*2
  • The compound interest for 3 years in terms of simple interest is

             C.I. = I +  r/100+ I/(R/100)2

 

  • If a sum of money becomes m times itself in t years at simple interest, then in how many years it become n times at the same rate of interest ?

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           Time = (n – 1/m – 1)t

  • If a sum of money becomes m times at r% (rate of simple interest), then at what rate it becomes n times in the same time ?

           Rate of interest = (n – 1/m – 1)r

                                    

  • If a sum of money becomes x1 in t1 years and x2 in t2 years, then rate of simple  interest % = 100(x2 – x1)/x1 t2 – x2 t1
  • If a sum of money becomes Rs. x in t years , then the rate of compound interest is

           Rate % = [(x/P)1/2100

  • If a sum of money becomes x1  in t1 years and x2 in t2 years, then rate of compound interest % = [(x2/x1)1/t1-t– 1]×100
  • If a sum of money becomes m times in t years, then the time taken to become mnis

           Time = t×n

If difference between the S.I. and C.I. is x at the rate of r% compounded annually in 4 years , then x = P×r(400 + r)/1004

For worked out Question 

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