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**Compound Interest Calculation in 2 Minutes:**
Calculating compound interest involves a few steps, but with practice, it can be done quickly. Here's a step-by-step guide to finding compound interest within 2 minutes:
**Step 1: Understand the Basics**
Before diving into compound interest calculations, it's essential to understand the difference between simple interest and compound interest.
**Simple Interest:**
Simple interest is calculated only on the principal amount (initial investment or loan). It remains constant throughout the interest period.
**Compound Interest:**
Compound interest is calculated on both the principal and any previously earned interest. It increases over time as the interest earned is added back to the principal.
**Step 2: Gather the Required Information**
To calculate compound interest, you need to have the following information:
- Principal amount (P): The initial investment or loan amount.
- Interest rate (R): The percentage rate at which interest is charged or earned.
- Time period (T): The duration in years or fraction of years.
**Step 3: Apply the Compound Interest Formula**
The compound interest formula is given by:
A = P(1 + R/100)^T
Where:
- A is the final amount (including interest)
- P is the principal amount
- R is the interest rate
- T is the time period
**Step 4: Simplify the Calculation**
To expedite the calculation, you can use the following shortcut:
A = P(1 + R/100)^T ≈ P(1 + 0.01R)^T
This approximation works well when the time period is short or the interest rate is low. It saves time by avoiding complex calculations involving higher powers and decimals.
**Step 5: Calculate Compound Interest**
To find the compound interest, subtract the principal amount (P) from the final amount (A):
Compound Interest = A - P
**Example:**
Let's calculate the compound interest on an investment of $1,000 at an interest rate of 5% for 3 years.
Using the simplified formula:
A ≈ 1000(1 + 0.01 * 5)^3
A ≈ 1000(1 + 0.05)^3
A ≈ 1000(1.05)^3
A ≈ 1000 * 1.157625
A ≈ $1,157.63
Compound Interest = A - P
Compound Interest ≈ $1,157.63 - $1,000
Compound Interest ≈ $157.63
Therefore, the compound interest earned on the $1,000 investment after 3 years at an interest rate of 5% is approximately $157.63.
In conclusion, by understanding the basics, using the compound interest formula, applying the simplified version, and performing the calculation efficiently, you can find compound interest within 2 minutes.
how can we found compoud interest in 2 minutes very short trick Relate...
I can't able to understand compound interest and tommorow is my exam
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