Aptitude - Compound Interest - Discussion

CI = Amount - Principle.

525 = Principle(1+10/100)^2 - Principle.

Rate = 10, Time = 2.

525 = Principle(110/100)^2 - Principle.

525 = Principle((22/20)^2-1)).

525 = Principle(121/100-1).

525 = Principle (21/100).

Principle = (525*100)/21.

Principle = 2500.

Now to calculate S.I principle = 2500 T=4 (double the time taken for C.I i.e 2*2 = 4).

R = 5 (Half of the rate taken for C.I i.e 10/2 = 5).

S.I = (P*T*R)/100.

S.I = (2500*4*5)/100.

S.I = 500.

The amount at the end 1st year, A=45000(1+ 15/100)
= Rs 51750.

The farmer paid Rs 15000, so amount left ,A = 51750 -15000
= Rs 36750.

The amount at the end of 2nd year, A= 36750(1+ 15/100)
=Rs 42262.5.

The farmer has to Rs 42262.5 at the end of the second year.

@Pratiksha,
The general formula for calculating compound interest is,
P*(1+R/100)^n, but remember to subtract off the principal after in order to get the interest,

For instance, CI =Amount - Principal.

But, in case you wish to do it at once your apply P*(1+R/100)^n - P by using this formula you automatically get the interest compounded, you may not need to subtract off the principal again like in the first case.

It's very simple just look at the question you have a direct relation between amount 525 and 10%.

For 2 years u get 525 at 10% for 1 year it is around 260. So if u invest around 2500 for 1 year at 10% the amount u get as interest is 250 but compound interest is slightly higher than simple interest and remember this is logical.

Now just put sum in simple interest formula
2500 * 4 * 5/100 = 500.

A farmer takes a loan of Rs:45000 at 15% per annum to instal a pump in his field. He pays back 15000 to the bank along with the interest due at the end of the first year. At the end of second year he pays back the balance to the bank. How much does the farmer pay the bank at the end of second year?

Can anyone solve this?

In the simplest way, we can slove this by;

Suppose principle amount is 100.
For two years CI 100*10%=10 again 110*10%=21 (total interest).

Total increased 21%, we can take it as 525 is 21% then 100% will be the principle amount which 2500.

@Sandy.

Actually this is the formula for finding amount, amount= principle +interest so when we apply the ci. The formula basically finding the amount so when we minus it with the principle it equals to the interest which is 525.

As they are saying 10% per annum and 2 years in time, we can be sure that Rs 21 gained as interest for Rs 100 in 2 years.

So, C.I is 21 when Principal is 100.
if C.I equal 525, the principal will be (100 * 525)/21.
= 2500.

Guys its very simple.

Use net effect for calculating the interest, equate it to the CI given and find the principle amount. The only thing is you should be knowing how to use net effect.

@sandy

Given that 525 is the CI calculated for 2 years at a rate of 10%. so, 525 is the difference of ((P+CI)-(p)). where "p" is the principle amount.

Did you get sandy?