The Formula for Compound Interest

As the above method is very long and it cannot be used at every place so we can use the formula to find the compound interest.

Total Amount  \mathrm{=P\left(1+\dfrac{r}{100}\right)^n}

Compound Interest (CI) = Amount (A) – Principal (P)

Example

If a person borrow Rs 15,000 for 3 years at an interest rate of 10% compounded annually. Then what will be Compound Interest and the amount to be paid by him?

Solution:

Given,

P = 15000

r = 10%

n = 3

 \mathrm{A=P\left(1+\dfrac{r}{100}\right)^n}

=15000\left(1+\dfrac{10}{100}\right)^3

=15000\times\dfrac{11}{10}\times\dfrac{11}{10}\times\dfrac{11}{10}

= Rs 19965

CI = A – P

= 19965 – 15000

= Rs. 4965

In the case of half yearly, the time period will get double and the rate of interest will get half.

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