" Compound Interest } INTRODUCTION Jn the previous classes, you have Jeamt about simple interest ancl other related terms, You have also solved many problems on simple interest. In this chapter, we shall leam about compound interest, difference between simple and compound interest, computation of compound interest as a repeated simple interest with a growing principal and also by use of formula: 2.1 INTEREST It is the additional money besides the original money paid by the borrower to the moneylender (bank, financial agency or individual) in liew of the money used by him. Principal, The money borrotwed (or the money lent) is called principal. Amount. The sum of the principal and the interest és called amount. Thus, amount = principal + interest. Rate. It is the interest paid om 100 for a specified period. ‘Time, [tis the time for which the money is borrowed Simple Interest, It is the interest calculated on the original money (principal) for any given time and rate. Formula; Simple Interest = HusipalRatex Time | 100 Compound Interest ‘At the end of the first year (or any other fixed period), if the interest accrued is not paid to the moneylender but is added to the principal, then this amount becomes the principal for the next year (or any other fixed period) and so on. This process is repeated until the amount for the whole time is found. The difference between the final amount and the (original) principal is called compound interest. Remark In the case of simple interest, the principal remains constant for the whole time but in ie ce interest, the principal keeps on changing every year (or any other If oe eee is ets ee annually, the principal changes after every year and if the interest is compounded half-yearly (or any other fixed period), the princi every six months (or any other fixed period). NS ae/ given t paid ncipal cl the pountl put other if the (Mustrative | Examples / ample 1 Find the amount and the compound interest on €15000 for 2 years at 8% per annum. Solution. __Prineipal for the first year = 715000. Interest for the first year = et = 21200. Amount after one year = 715000 + 1200 = €16200. Principal for the second year = €16200. Interest for the second year = x Hamxent = 71296, 716200 + 71296 = 717496. final amount — (original) principal 717496 — 715000 = 72496. Amount after 2 years Compound interest for 2 years “Note The compound interest may also be obtained by adding together the interest of consecutive years. [ ‘Thus, in the above example, j | compound interest = interest of first year + interest of second year 1200 + 31296 = %2496, Example 2 Find the amount and the compound interest on 225000 for 3 years at 12% per annum, compounded annually, Solution. Principal for the first year = %25000. Interest for the first year = eee = %3000. Amount after one year = 25000 + %3000 = 228000. Principal for the second year = %28000. Interest for the second year = & Bienes 2 = £3360, Amount after 2 years = 228000 + 73360 = %31360. Principal for the third year = 731360. Interest for the third year = & aes = 376320 ‘Amount after 3 years = %31360 + €3763-20 %35123-20 Compound interest for 3 years = final amount ~ (original) principal %35123-20 ~ €25000 = %10123:20 Example'3) Find the compound interest to the nearest rupee on £7500 for 2 years 4 months at 12% per annum reckoned annually. Solution. Principal for the first year = 7500. gPOXILX1 _zo99, 100 Interest for the first yearAmount after one year = %7500 + %900 = 8400. Principal for the second year = 8400. 121 Interest for the second year = < SUZAT = §1008. ‘Amount after 2 years = €8400 + €1008 = 79408. 1 Remaining time = 4 months = fa year = 5 year. Principal for the next 4 year = %9408. 9408 x 124 Interest for the next + year = ——,—* = €37632 Amount after 2 years 4 months = %9408 + %37632 = 8978432 -. Compound interest for 2 years 4 months = final amount ~ (original) principal = 8978432 — 27500 = €2284-32 = £2284 (to the nearest rupee). “Example 4) Find the amount and the compound interest on €16000 for az years at 10% per annum, the interest being compounded half-yearly. Solution, Since the rate of interest is 10% per annum, therefore, the rate of interest half- yearly = ; of 10% = 5%, Principal for the first half-year = %16000. 16000 x51 Interest for the first half-year = & Tl = 7800. ‘Amount after the first half-year = €16000 + 7800 = %16800. Principal for the second half-year = £16800. Interest for the second half-year = viens zs40. Amount after one year = 716800 + €840 = €17640. Principal for the third half-year = £17640. 2 T7680 51 _ Interest for the third half-year = = 7° =°*" = e382. Amount after i years = %17640 + %882 = 718522. final amount = (ori Compound interest for 1 3 years 18522 - £16000 = RRSIRPIES) Nikita invests £6000 for two years at a certain rate of interest compounded ‘annually. At the end of first year it amounts to %6720. Calculate : (@) the rate of interest. (ji) the amount at the end of the second year, Solution. Given, principal = %6000, amount after one year = €6720, (Interest for the first year = €6720 ~ 6000 = 2720. Let the rate of interest be R% p.a., then (ii) ‘Example when | Solution. on Solutio For(i) Principal for the second year ~ 26720 Interest for the second year = 9720%12%1 _ xgq6.49) 100 + The amount at the end of second year = £6720 + 7806-40 7526-40, ExaiHPIEG| Calculate the amount due and the compound interest on 27500 in 2 years when the fate of interest on successive years is 8% and 10% respectively. Solution, Principal for the first year = 27500, rate = 8%. Interest for the frst year = <20<541 _ g600, 7 Amount after the first year = 27500 + %600 = %8100. Principal for the second year = %8100, rate = 10%, 8100%10 <1 100 Amount due after 2 years = %8100 + %810 = $8910. Compound interest for 2 years = amount ~ principal %8910 - 77500 = %1410. Interest for the second year = & = 810. " 10% Example 7 Calculate the difference between the compound interest and the simple interest halk on 712000 at 9% per annum in 2 years. Solution. Given _ principal = €12000, rate = 9% p.a. and time = 2 years 12000%9%2 _ SL = ¢ BORONe = e2160. . For C1 Principal for the first year = £12000. Interest for the first year = ¢ 720221 _ eaggo, Amount after one year = 712000 + 71080 = 13080. Principal for the second year = %13080. = y13080% 91 eo = €1177:20 ; Ci. of 2 years = ©1080 + 7117-20 = 82257220. Difference between compound interest and simple interest in 2 years = ¥2257.20 — 82160 = 89720. Interest for the 2nd year Example 8 The simple interest on a sum of money for 2 years at 4% per annum is $340. ted Find (D the sum of money the compound interest on this sum for one year payable halt-yearly at the same rate, : Solution, Given, SI. = £340, rate = 4% p.a. and time = 2 years () Let the sum of money beD fen xRxT _ Bean gi = PERE 3 0 op 340x100 _ 24950. 4x2{é Since the rate of interest is 4% per annum therefore, the rate of intrest ha yearly = 2% Principal for the first half-year = Sa ? a x2x1 ast for the first half-year = <=—=7 2X1 ~ agp, Interest for the y os a “Amount after the first half-year = 4250 + %85 = €43a! Principal for the 2nd half-year = 74335, 4305251 Interest for the 2nd half-year = = 7 = %86.70 Compound interest on the above sum for one year payable half-yearly = %85 + %8670 = 2171-70 ‘EXainplé 9) The simple interest on a certain sum of money for 3 years at 5% per annum, +. £1000, Find the amount due and the compound interest on this sum of money at the same rate after 3 years, interest is reckoned annually. Solution. Given simple interest for 3 years = 1200. Be Simple interest for one year = 4 of $1200 = %400 1 : ; PxRxT _ Px Bod ah 100 Sk Ok 100 Sol = p= ee | zs000. ‘Amount after one year = ©8000 + 400 = 78400. Principal for the second year = 78400. 840051 Interest for the second year = €—T5 420, Amount after 2 years = ©8400 + €420 = 78820. Interest for the third year = yet = €441, ‘Amount due after 3 years = %8820 + 2441 = 79261, Compound interest for 3 years = %9261 ~ ©8000 = T1261. (Example Ranbir borrows 720000 at 12% per annum compound interest. If he repays 78400 at the end of the first year and €9680 at the end of the second year, find the amount of the loan outstanding at the beginning of the third year, Solution. Principal for the first year = 20000, rate = 12%. Interest for the first year = ee 2400. Amount after the first year = 720000 + €2400 = %22400. ‘Money refunded at the end of first year = 78400. a Principal for the second year = %22400 - 78400 = €14000. 14000 «12 <1 ae lle Amount after the second year = £14000 + €1680 = €15680. Money refunded at the end of 2nd year = 79680. » The loan outstanding at the beginning of the third year = 815680 ~ %9680 = 6000. Interest for the second year = 2 a —————————— aeamipleM) Mr. Kumar borowed 215 rl 15000 for two years. The rate of interest for the two ‘» and 10% respectively. If he repays £6200 at the end of first year, amount at the end of the second year, Solution. Principal for the first year = £15000, rate = 8% p.a. Interest for the first year = ¢ 15000%8x1 100 Amount after one year = €15000 + 21200 = 16200 Money repaid at the end of first year = 26200, Principal for the second year = £16200 ~ £6200 = £10000; rate of interest for second year = 10% pa. e ata Interest for the second year = ¢ SU%101 _ gqp0, Amount after second year = €10000 + €1000 = €11000. ‘The amount outstanding at the end of second year = €11000. successive years are 8 find the outstanding = 1200. Example 12 Sulekha deposits £8000 in a bank every year in the beginning of the year, at 10% per annum compound interest. Calculate the amount due to her at the end of three years. Also find her gain in three years, Solution. Principal for the first year = €8000, rate = 10% p.a. Interest for the first year = XS PHO*E - ee00, %8000 + T3800 = 78800. Money deposited at the beginning of 2nd year = 78000. Principal for the 2nd year = %8800 + T8000 = %16800. Amount after one year Interest for the 2nd year = eet = 71680. Amount after 2 years = ©1680 + 1680 = %18480. ‘Money deposited at the beginning of 3rd year = 78000. Principal for the 3rd year = €18480 + €8000 = 26480. 246880 101 PED TOXT = 82648, %26480 + $2648 = 29128. 29128. 000 + ©8000 + €8000 224000. 29128 - ¥24000 = %5128. Interest for the 3rd year = repays Amount after 3 years ‘ind ie * The amount due to Sulekha at the end of 3 years Money deposited by Sulekha in 3 years Gain of Sulekha in 3 years Exam tm £5000 at 12% compound interest per annum, interest payable ae a ae pays bate 1800 at the end of every six months. Calculate the third Be ect E id of 18 months in order to clear the entire loan, he ent payment he has to make at € REG bins wrreCok iene 8) 1% Pe nee a a half-yearly = 6%. ae Principal for the first six months = ©5000, 5000x621 Interest for the first six months = © = 7300. ‘amount after first six months = %5000 + €300 = $5300.six months = 71800. 5300 - £1800 €3500. x3500x641 _ z010, 100 the end of first | for the second six months Money refunded at Principal Jaterest for the second six mont 3500 + €210 3710. 21800. %3710 — T1800 = €1910. “Amount after second six months Money refurided at the end of second six months Principal for the third six months 1910 x61 _eqigy Interest for the third six months = = “Tyg =T114.60 months to clear the entire loan e190 + T1460 2024-60 + The payment to be made at the end of 18 EXERCISE 7. Find the amount and the compound interest on %8000 at 5% per annum for 2 years, 2 A man invests 246875 at 4% per annum compound interest for 3 years. Calculate: (3) the interest for the first year. (@ the amount standing to his credit at the end of the second year. 4 (iii) the interest for the third year. 3° Calculate the compound interest for the second year on %8000 invested for 3 years at 10% p.a. Also find the sum due at the end of third year. 4 Ramesh invests €12800 for three years at the rate of 10% per annum compound interes. Find : () the sum due to Ramesh at the end of the first year (i) the interest he earns for the second year. (iii) the total amount due to him at the end of three years. 5 The simple interest on a sum of money for 2 years at 12% per annum is 1380. Find: (D the sum of money. i, Ea ‘compound interest on this sum for one year payable half-yearly at the same rate. 6 A person invests £10000 for two years at a certain rate of interest, compounded annually. At the end of one year this sum amounts to €11200. Calculate : (i) the rate of interest per annum. (i) the amount at the end of second year. 7 Mr Lalit invested 25000 at a ceriain rate of interest, compounded annually for tw? years. At the end of first year it amounts to % 5325. Calculate (A) the rate of interest, (i the amount at the end of second year, to the nearest rupee. » Arman invests 75000 for three years at a certain rate of interest, compounded annually. At the end of one year it amounts to 75600. Calculate: @ the rate of interest per annum. : 10 e n ¢ i c ¢ 1 14 16 7 18ed for nterest (i the interest accrued in the second year. (iii) the amount at the end of the third year. 9 Find the amount and the com ound, st rea , Se ied aan Pound interest on %2000 at 10% paa. for 24 years {0 Find the amount and the compound interest on €50000 for 12 years at 8% per annum, the interest being compounded semi-annually. a 4 Calculate the amount and the compound interest on 75000 in 2 years when the rate of interest for successive years is 6% and 8% respectively, 32 Calculate the amount and the compound interest on 217000 in 3 years when the rate of interest for successive years is 10%, 10% and 14% respectively. 18 A sum of 79600 is invested for 3 years at 10% per annum at compound interest. (9 Whatis the sum due at the end of the first year? (i) Whatis the sum due at the end of the second year? (ii) Find the compound interest earned in 2 years. (i) Find the difference between the answers in (ii) and (i) and find the interest on this sum for one year (@) Hence, write down the compound interest for the third year. 44 The simple interest on a certain sum of money for 2 years at 10% per annum is € 1600. Find the amount due and the compound interest on this sum of money at the same rate after 3 years, interest being reckoned annually. 15 Vikram borrowed %20000 from a bank at 10% per annum simple interest. He lent it to his friend Venkat at the same rate but compounded annually. Find his gain after 24 years. 16 A man borrows %6000 at 5% compound interest. If he repays 71200 at the end of each year, find the amount outstanding at the beginning of the third year. 47 Mr. Dubey borrows €100000 from State Bank of India at 11% per annum compound interest. He repays 741000 at the end of first year and €47700 at the end of second year. Find the amount outstanding, at the beginning of the third year. 48. Jaya borrowed £50000 for 2 years. The rates of interest for two successive years are 12% and 15% respectively. She repays © 33000 at the end of first year. Find the amount she must pay at the end of second year to clear her debt. 2.2, FORMULA FOR COMPOUND INTEREST Compound interest (abbreviated C.L) can be easily calculated by the following formula a Formula: A =P (+35) P is the principal, ris the rate of interest compounded 1g) a, ted for any other fixed period (ike 6 months), then the principal term of the fixed period (like 6 months), period to the next period is called a conversion period. It (ie, the interest is compounded annually), then there is jeriod is six months (i. the interest is compounded two conversion periods in a year; if this period is three where A is the final amount, yearly and n is the number of years. i CL = a-peP(t+G) _peP Remark Tf the interest is calculat keeps on changing every The time from one specified interest this specified period is one year (i one conversion period in a year; if this ps semi-annually), then there are" erly), then there are fou st ig compounded quar conver months (i. the interes eee -we can restate the formula as: om perio Ta year In view of this discus ios inte Pie eA F(R i) ete emer rete the rate of interest per conversay co fentoa and 1s the number of conversion periods. . Obviously, if the rate of interest per annum is 10% and if the interest. | ‘ is compounded semi-annually, then the rate of interest per conversion | period is 1. of 10% ie, 5%. If the interest is compounded quarterly, then | ¢ 2 j . 25%, | 4 | the rate of interest per conversion period is ; of 10% 2.2.1 ta solving problems on compound interest, remember the following: LA=P (+5) and CL whore A is the amount, P is the principal, ris the rate of interest per conversion perad Gnd n is the number of conversions periods, 2, When the rates of interest for the successive fixed periods are r,%, 72%, r3%by .-, then amount A is given by 5 e “A)(14 2 2) i a=? (te) Slt Ae i 5,1; (simple interest) and Cl. are equal for the first conversion period on the same So sum and at the same rate. 4. CLL of 2nd conversion period is more than the C.l. of Ist conversion period and C1. of 2nd conversion period - C.l. of 1st conversion period = S.I on the interest of the Ist conversion period. 5, CL for the nth conversion period = amount after 1 conversion periods — amount after (n ~ 1) conversion periods 6. When the total time is not a complete number of conversion periods, we consider simple interest for the last pattial period. For example, if time is 2 years 5 months and the interest is r% per annum compounded annually, then s Example 1 Find the amount and compound interest on % 16000 for 2 years at 15%, interest being payable annually. z Solution. Using the formula, we get 15 y A = e160 (14-5 = 4) : 16000 +3) |a-r(teg . 2 pans 16000 (8) = %16000 x ( 16000 x 3x 3 00 x x55 = X2il60. aa A~P = 221160 — 716000 = 75160. WG, Unacestinding 1CSh Matec 2 1"eds ‘Sion tiod iod the ods. ider aths rest (BiamiPIE2) Rohit borrows £86000 from Arun for two years at 5% per annum simple interest He immediately lends out this money to Akshay at 5% compound interest compounded annually for the same period, Calzulate Rohit’ profit in the transaction at the end of two years. Solution. Principal = %86000, rate = 5% and time = 2 years. Simple interest paid by Rohit in 2 years : gi = PARXT - gaco00x5x2 | 100 z mW 8600. Compound interest earned by Rohit in 2 yeare If A is the amount after 2 years, then ” 2. 2 a= (+8) 5 (+3) = » (3) 00 %86000 1455 = 786000 20 86000 « 41 _ 00 « BF = 0485, . Ci. earned by Rohit in 2 years = amount after 2 years ~ principal = 794815 — 786000 = T8815 Rohit’s profit at the end of 2 years = C1. eamed ~ SIL paid = 88815 ~ 78600 = 2215. Buaiple 9) Calculate the interest earned and the amount due, if a sum of €15000 is invested for 12 years at 8% per annum compound interest, interest being compounded semi-annually, ” Solution. Since rate of interest is 8% per annum, therefore, rate of interest per conversion period (half-yeatly) = 4%. ‘As the money is invested for un years, therefore, n (the number of conversion periods) = 3. 3 ‘ 000 (1+ a) 26) _ 2 28 26 15000 x 8) = 115000 x 26x28 x76 gS = 71687296. 16872.96 - €15000 = 1872.96. 00 amount to in 2 years, at compound interest, if the Y, and 5% pet year? a=r(teig) 0 A-P Interest earned Ganple se How much will $250 rates for the successive years are 4% Solution. A=P (1+ )0+za) oe 4) = e201 50 (BekipIEIY Compute the amount and the compound interest on 10000 compounded annually for 2t years at 4% per annum. Solution, First, we find the amount after = my 4) p(1+i5) = #10000 (1455 evra (3) s = £27300. x 2 years A w= 516. Principal for the third year = e108) 10816 een 1 year = °— inte Interest for the next 5 e : 6 2 soluti ‘Amount after 22 years = [10816 + €2163: 2 = %1103232 5 nt + for 24 years = A-P Compound interest for 25 Ogee = €1002:32 Bai “Alternative method (by using formula) \ . of xa = Jo [Amount at the end of 27 years = £10000 (+ } 144 sole Compound interest for 24 years = €1103232 - 10000 a = €103232 “Eyaiipla’6 Rohan borrowed €40000 at 10% p.a. simple interest, He immediately invested this money at 10% paa, the interest compounded half-yearly. Calculate Rohan’s gain in 18 months. Solution. Principal = €40000, rate = 10% p.a., time = 18 months = & ‘years = 3 years. Simple interest paid by Rohan in 18 months : 3 — PxRxT _ » Ao000x10%3 B St eer ale fy a, ‘Compound interest eamed by Rohan in 18 months : Since the rate of interest is 10% paa, therefore, the rate of interest per conversion period sc (half-yearly) = 5%. As the money is invested for 18 months, therefore, n(the number of conversion periods) = 3. A= r(tegg) = ett (Ie) Pits 3 40000 x (32) = e40000 x 281 — 46305. . CJ eamed by Rohan in 18 months = amount after 18 months — principal = %46305 ~ 340000 = 6305. Rohan‘s gain in 18 months = CL. earned ~ S.L. paid = 26305 ~ %6000 = 2305, (EGBA? What sum of conan pent Sum of money will amount to €3630 in two years at 10% per annum Solution, A=P (es) = %3600 = piety 100. 100. =) 3630 = Px 1 10 “10 2(2600%19 i 10 x 2) = 23000.invested gain in years. n period version annum jie 8) What d Sum of money will amount to 3704-40 in 3 years at 5% interest? > compound Solution. A Peay = Ra7o840 = P( lh a2 = ea 20% 30 = 37044 20,20, 20 oa 221 1350 181 Hence, the sum = €15000. 2172 => P= e272 x BP = e15000. Example 20) The compound interest on a certain sum of money at 5% per annum for two years is £246, Calculate the simple interest on the same sum for three years at 6% per annum. Sofution. = _ & > P= «(24647) 2400. «. Simple interest for the same sum for 3 years at 6% per annum 2400 x63 _ g432. 100 GURREREED At what rote percent per amEN Hompound iotqest will 25000 axnoxint tn 5832 in 2 years? Solution, A = P Ors) = %5832 = 75000 (1+ 2 2 5832 _ 729 _( 27 im (+5) = 5000 oak )Hence, rate = 8% per annum. (BeAHPIEAD At what rate % pa. will a sum of 74000 yield %1924 as compound interest in 3 years? Solution. Given P 24000, CL = 71324 and T = 3 years. A=P+Cl. 4000 + 1324 = 5324. Let the sate of interest be 1% p.a- Here, time = 3 years, so 1 = 3. Using the formula iz 2)" we get narfioglne 7y eam = €4000 (1+ ws) 3 5 ee ipa ae > (Mig) = Sn ion eS ay (i ree. (5) = (i) 22+ a7 5, eee tel sre, joo 19 1 i007 10 Hence, the rate of interest = 10% p.a. {BGiNpIEAS) A sum of 716000 earns a compound interest of $2522 in 18 months, when the interest is compounded half-yearly, Find the rate of interest. Solution. Given P = 716000, CL. = %2522 and T = 18 months. Let the rate of interest per conversion period (half-year) be 1%. ‘As the interest is compounded hal-yearly i. after 6 months and the time is 18 months 0 n(number of conversion periods) = 8 =3. A = P+ Cl, = 216000 + $2522 = 718522. A= p(1+) = t1ss2 = 16000 (+3) = (+5) = 18522 _ 9261 700) ~ 16000 ~ 8000 3 3 = | = (2) ae (i: 2) 1 * i000 = eee rea =fp-1s £21 ore 09 © foe tO ‘Thus, rate of interest per conversion period (6 months) = 5%. Rate of interest per annum = 10%, (EAP Determine the rate of interest 2 per annum for 2 ofitsell in one year, compounded half-yearly. ee ‘Acco inte ane Solut SolSolution, Let the principal be P and the rate of interest be r% per conversion period (half-year). Here, interest is conpounded half-yearly. ‘Total time is one year, so n(the number of conversion periods) = St in According to given, A= 2p 5 29 ry a=P(1+ Gy 3 Po plist Br (es) = 2. 100) 625 25, => eee ae = i * 3 iw a oe "8 ie, rate of interest per conversion period (half-year) = 8%. «+ Rate of interest per annum = 16%. (Example 15) The compound interest on a sum of money for 2 years is 7410 and the simple interest on the same sum for the same period and at the same rate is 400. Find the sum and the rate of interest, Solution, SIL for 2 years = %400 S.L for 1 year = ‘~ E CL for first year = %200 (“* for first year, CL = SL) Given, Cl for 2 years = €410 CL for the second year Difference of interests €410 - 7200 = @210. %210 — %200 = 210 the = 710 is the interest on 2200 for one year. = 10%100 9, _ gy SLx100 Rate of interest = 7O% = 5% a Principal = %220%100 = e4ooo, sree ths, 5x1 ‘ RxT ~ (ERRRIPIE TS) A certain sum amounts to 4840 in 2 years and to €5324 in 3 years at compound interest. Find the rate and the sum. Solution. Let the rate of compound interest be r% per annum. ‘The amount after 2 years will be the principal for the third year, r xssn4 = asd (14555) tat = Se ce + 0 * 4000 r Same = 700 #840 1 = 2 x 100-10. = re gx «. The rate of compound interest = 10% per annum. Let the original sum be P. elf 10 i 74840 = P (rayny e480 = PX 35% 9 p = 4940 x 12x10 = 74000. a ‘The original sum is %4000. 4, calculated yearly, on a certain sum of money fo y (e47) The compound interes (Bxaniplelt7) The comp. Hird year it is €1452. Caleulate the rate oF interest gy second year is £1320 and for the d the original money. Solution. CL for the third year = %1320 and CLL for the second year = ©1452. SIL on & 1320 for one year = €1452 ~ ¥1320 = 132, 492 100 Si it = BEX I % = 10% R= Shay Rate of interest = ony” Sa Tet the original money be @P. ‘Amount after 2 years ~ amount after one year = CL. for second year = r(3+3g) -P(2+ 320 fay? Se qa) _ = 3) Al = 1320 = P(e 2) = 1220 = \ Px 41 = 1320 => P= 1320 x 1 = 12000. The rate of interest = 10%, and original money = %12000. Example 18) In how many years will £4000 amount to €5324 at 10% compound interest Solution. Here P = 24000, A = 25324 and r = 10% p.a. Weer 2 10g A ( a) = 25924 = 4000 (+z saa | fy" nyt _ eat _ (an? 2 fila) = @) -ta(a) Bes . The required time = 3 years. Example 19) In what period of time will 812000 yield €3972 as compound interest at 10% per annum, if compounded on yearly basis. Solution. P = 712000, C.l. = %3972, rate = 10% p.a. A= P+ CI = 212000 + 23972 = 715972, Using A =P (gy, we get 15972 = %12000 x (eel sar (uy (2 i000 ~ Lio, (3) 2281: Solutio Sol(Example 20° A sum of £25000 invested %28121-60. Compute the time at 8% p.a. compounded semi-annually amounts to fe Period of investment 25000, A = 2812160 As the interest is compounded semi-annually, Solution, Here, P (rate of interest per conversion period) a = J of 8% = 4% Tet the number of conversion petiods be 1, theft %28121-60 = ®25000(14 4 i00, 2812160 a5999 2)" 100 (3) ae (ex = 2312160 _ 17576 25) ~ 100%25000 ~ 156 > 13, *- Time period of investment is 3 half-years ie. uy years. Example 21° A sum of money invested at compound interest doubles itself in 4 years, interest being payable annually. In how much time will it be eight times? Solution. Let the principal be €P and rate of interest be r% pa. As the money doubles itself in 4 years, we have 4 = Blie Ee = Wen) Z interest? VANE on, os oe are f) Let the money become eight times int years, then NS sae Bp = P(1+ 5) = (ug) - 2-8 > Qin ns fusing (0) = 27/4223 Spr3Sn=2 Hence, the required time = 12 years. 7 . years and the compound interest in 2 years on a Example 22) The simple interest in 3 years an t at 10° certain sum at the same rate are ¥1200 and €832 respectively. Find ; (i) the rate of interest (f the principal (iii) the difference between the C.l. and S.1. for 3 years, Solution. (i) Let the principal be @P and rate of interest be R% p.a. According to the first condition of the question, PXRX3 _ 4709 => Px R= 40000 a 100 According to the second condition of the question, e [esha] = soofonett] = 932 (using (1) Ss R | 00)"VUDRUYO os RPO)" g32 R 40000 « *~“y00%100 gqioo? + R2+2* 100 x R — (100)71 R2 +200 R = 208 R = R-aR = 0 => RR-8)=0 emer R= 0 of R-9=9 Zien R 2 0 of Ky, but R cannot be zero R= 8 = rate of interest = 8% pa. 82K 200 R = 208 R = 0 (i) On using (1), we get i) Px8 = 40000 > P = 5000. Principal = €5000. : Rate of compound interest = 8% pa. and principal = 25000. soto(14 5) u ‘Amount due after 3 years as 1 5000 x 2) = ¥5000 x Zx BIS ory = S74 = 26 298-56 3 CLL for 3 years = A-P = %6298:56 - 75000 = 2129856 = The difference between the C.L and SIL for 3 years (ERRMPIEZS) A certain sum of money is invested at the rate of 5% per annum compound interest, the interest compounded annually. If the difference between the interests of third 1298-56 - 71200 = 798.56 year and first year is €102-50, find the sum. Solution, Let the sum of money invested be €x. Rate of interest = 5% pa Interest for the first year = weet = . Xa Interest for the 3rd year i.e. the compound interest for the 3rd year = amount after 3 years — amount after 2 years ne 5) 5 = (4) -e(14 5) ee BE) z 3a) ae a Given, difference between interests of third year and first year is 10250 = => = abe 2 205) 3000" 20 ~ “3” caleanes 2e kt ea 2 ‘8000 2 = 205 8000 x = 205 Syes000 =. 2% a = 20000. peamiple aa a year, pay out, if the Solution. Let SI for 1 Rate of and ith Accor Example 42000 oa (it Solution mi y «i| pampteae ee hal Sum Of money, the difference between the compound interest for a year, payad ¢ half yearly, and the simple interest for a year is €180. Find the sum lent ut, if the rate of interest in both the 1 cases is 10%. solution. Let the principal be &y. SI. for 1 year at 10% per annum = ¢£810%1 100 Rate of interest per conversion period (half-year) = and (the nuniber of conversion periods) = 2. CL = 1 According to the given information, :. The sum lent out = €72000. 180 = x = 72000, ‘Example 25) The difference between the compound interest and the simple interest on £42000 for two years is 7105 at the same rate of interest per annum. Find () the rate of interest @) the compound interest eared in the second year. F Solution. () Let the rate of interest be r% per annum. Erpound Here P (principal) = £42000 and T (time) = 2 years ed gx, = ¢ £2p00xrx2 100 ry ry a CL. = ©4200 (a) ~1}= e42000/() 26 ? | 2r 2 CLS = am) tie] ~ 842000 2 ? 2 ) an } According to given, Be = 105 = 2 =25 =r=5,-5, but r cannot be negative > r=5. Hence, the rate of interest = 5% per annum. we i) C1. eared in two years = xa) |ag 200051 _ 9100, Interest earned in one yeat = ase Cet he eed ee 22100 = £2205. ff by paying © awed a sum of money and agrees £0 Pay o ving : i pee wet quand atthe end of the second year Ifthe rate oF compougy gs parenmemy ape the sum pore comy interest is 5% Solution. Let the money borrowed be €- ‘Amount after one year = Money refunded at the end of first year 21 Principal for the 2nd year = x(Bx-a150) 2 5 ‘Amount at the end of 2nd year = «(Fx-250) x (+3) came 5 2 =°(Ze 9150) x 3 But the money paid at the end of the 2nd year = %4410, (Bx-as0)x 3 = 4410 20 = 2g ~ 150 = 4a10 x Ft = 4200 > Bix = 4200 + 3150 = 7350 > x= 730% 2 The sum borrowed = 7000. EXERCISE 1 Find the amount and the compound interest on %5000 for 2 years at 6% per annuit, interest payable yearly. 2 Find the amount and the compound interest on 78000 for 4 years at 10% per annum interest reckoned yearly. 3 If the interest is compounded half yearly, calculate the amount when the principal is 7400, the rate of interest is 5% and the duration is one year. 4 Find the amount and the compound interest on £5000 at 10% p.a. for 12 yeats compound interest reckoned semi-annually. i 5) Find the amount and the compound i pounded es ipound interest on 100000 quarter]} Smonths at the rate of 4% p.a. cS {a Hint r= 2 of 4% = 1% and m= © Find the difference between C1. and S11. o7 payable yearly. 9 3 yn suum of T4800 for 2 years at 5% per anntil™ 19 20 aa 23und 1 is ars; ue 10 w az 2 u rs 16 7 19 Find the difference between the simple interest and compound interest on 2500 for 2 years at 4% per annum, compound interest being reckoned semi-annually: Bind the amount and the compound interest on 2000 in 2. years if the rate is 4% for the first year and 3% for the second year, Find the compound interest on €3125 for 3 years if the rates of interest for the first, second and third year are respectively 4%, 5% and 6% per annum. What sum of money will amount to 29261 in 3 years at 5% per annum compound interest? What sum invested at 4% per annum compounced semi-annually amounts to 7803 at the end of one year? What sum invested for 13, years compounded half-yearly at the rate of 4% p.a. will amount to %132651? (On what sum will the compound interest for 2 years at 4% per annum be £5712? ‘A man invests £1200 for two years at compound interest. After one year the money amounts to 81275, Find the interest for the second year correct to the nearest rupee. ‘At what rate percent per annum compound interest will €2304 amount to €2500 in 2 years? ‘A sum compounded annually becomes = times of itself in two years. Determine the rate of interest per annum. "a At what rate percent will %2000 amount to 2231525 in 3 years at compound interest? If £40000 amounts to €48620:25 in 2 years, compound interest payable half-yearly, find the rate of interest per annum. Determine the tate of interest for a sum that becomes 745 times of itself in 13 years, compounded semi-annually. = ‘At what rate percent p.a. compound interest would £80000 amount to 788200 in two years, interest being compounded yearly. Also find the amount after 3 years at the above rate of compound interest. 21 A certain sum Amounts to £5292 in 2 years and to €5556-60 in 3 years at compound interest. Find the rate and the sum. ‘A certain sum amounts to £79860 after 3 years and €876:46 after 4years. Find the interest rate and the sum. 23 In what time will £15625 amount to €17576 at 4% pet annum compound interest? (0 in what time will @ 1500 yield € 49650 as compouncl interest at 10% per annum compounded annually? ( Find the time (in years) in which €12500 will produce £3246-40 as compound interest at 8% per annum, interest compounded annually. 216000 invested at 10% p.a, compounded semi-annually, amounts to %18522. Find the time period of investment. What sum will amount to 5% and 6% for the successive years? ‘A cum of money is invested at compound interest payable annually, The interest in ‘raianicesssive years iy 225 and ©240, Find: (i) the rate of interest. (i) the original sum. (ii) the interest earned in the third year £2782:50 in 2 years at compound interest, if the rates are Compound Interest Ai ven the compound interest and sj he difference between 4 ‘on what sum of mon’) 1 ee if the rate of interest charged for both is Sipe interest for 2 Y etween the compound interest fora yer payeble alert £ ae srevent out at 10% for a year is T15, Fing Be eetain sum of money Ten we simple jnterest om @ cers ne of money lent out. ‘The amount at compoun a 721250 in one year and zu ¥ t in sum for 3 years. # Sp he single tres. on 2. HI IB oon the same sum at the same rate for 2 y' is aoe 28000 for 12. years at 10% pa. wi 32 Find the difference between compound interest on hy As, semi-annually. compounded annually an 4g) A sum of money is lent out at compound interest for two years at 20% pia., CL being the same sum of money is lent out at compound interest at the ee ee Cy being reckoned half-yearly, it would have fetched rate percent per anmvurn, asa : Galeulate the sum of money Jent out. %482 more by way of interest: f 4H A sum of money amounts to €19230 in one VERE and to 213891-50 in 15 years at compound interest, compounded semi-annually. Find the sum and the rate of interest per annum. ch is caleulated yearly on a certain sum of money years. Calculate the rate of interest. 5 £225 and the compound interes 3, Find the rate of interest and the interest whi 375 in two 2.3 GROWTH AND DEPRECIATION Growth We know certain things grow (Increase, appreciate) For example, India’s population, Delhi's pollution level, height of a plant, weight of a child, cost of goods ete “The grout per year (or unit of time) is called rate of growth. Tf the rate of growth is constant, then V=V\ (8) 100, where 1% is the rate of growth per year, n is the number of years, Vg is the present measure of the quantity and V is the measure of the quantity after n years. Similarly, if Vo is the measure of the quantity is Pewee quantity n years ago and V is the present measure ve vol ay ola) Remark If the rate of growth is 7,% duris a i ae ee the first year (or unit of time) and 15% during the V=V,, (telus n ) ‘ 100)(7* 300 where Vo is the present meas sare of thi : after two years (or units of time). quantity and V is the measure of the quantity This formula can be exte tended f Cain for mote than 2 years (or unils of time). ‘The value of cine @ machine or vehicle ete. decreases with time due to weat The decrease of the value Meee ee ees Per year (or anit of time) is called rate of depreciation. iation is constant, then ee where 14 value and \ similarly The mun as waste 0 Exampl every Solution Bam AM Soluti ral Soluimple > Pra? “d the Noney, terest ‘d the when being at the tched ars at iterest lation, resent easure ng the yantity > weal ee Pa ee ee where 1% is the rate of depreciation per year, » is the number of years, Vo is the present Rae oridVils the valud afters pes ney 4 Se ee Oa Similatly, if Vo is the value m years ago and V is the present value, then v= ( a) 300 The number of years a machine car be effectively used is called its lifespan, after which itis sald as waste oF scrap, (lustrative \ Examples / Example The present population of a town is 48000. It is increasing at the rate of 5% every yeat. What will be the increase in population in next 3 years? ; 3 Solution, Population after 3 years = (present population) x (3) a1 1 2 = x 221,21. 55566. 48000 Fx 5G = 55566. Inctease in population in 3 years = 55566 - 48000 = 7566. Example 2 The present population of a village is 5408, If it has increased at the rate of 4% every year, what was its population two years ago? Solution. Present population (population 2 years ago) * ( + = 5408 (population 2 years ago) x 2% = population 2 years ago = 5408 x Be 5000, u Example 3 The value ofa machine, purchased two years ago, depreciates at the annual rate of 10%. If its present value is 797200, find () its value after 3 years (i) its value when it was purchased Solution. (@ Value after 3 years = (present value) x (= es 999 = ¢(97200%;5 2x2) = %70858-80 2 (i) Present value = (value 2 years ago) * a) 9,9 > £97200 = (value 2 years ago) * 55%45 => value 2 years ago = ‘Beample @ The population of a village 2 years ago was 6250. Due to migration to cities, it decreases at the rate o! 2 years. + 8% every year. Find the decrease in its population in the lastah (population 2 years ago) * (0 -5) 23,23 = 5290. = 6250 x Bxze = 5 = 50 — 5290 = 960. olution. Present population = ‘The decrease in the population in 2 years = 62 car depreciates by 12.5 % every year. By what percent Willig after 3 years? the car be €Vp eamIple'S! The value of a value of the car decrease Solution. Let the present value of Value of the car after 3 years = (present value) = Vx ( ne ieads fn ae vel ee SUSE (a) ee 512-343, a HG P 8Y0* Sia 169° = 2(we"2). «, Percentage decrease in the value of the car after 3 years 169 A yo : = (aes eam o=| 75121006 arr % 169. 1225, (gene naea aul = 33 Foe %. xample 6 6000 workers were employed to construct a river bridge in four years. Al the end of first year, 20% workers were retrenched. At the end of second year, 5% of the workers at that time were retrenched. However, to complete the project in time, the & number of workers was increased by 15% at the end of third year, How many workers were working during the fourth year? Solution. The number of workers who were working during the fourth year my, 5,15 = 6000 (1-25 \1-5 N12 (148) iz mh 700)" Too, Vol ~a00 | -700)\t 300) 419 33 = 6000 x 44123 = SB B = 5004, Example 7) 24000 blood donors were registered with ‘red cross’ at Kolkata. The numbe! of donors increased at the rate of 5% every six months. Find the time period at the er of which the total number of blood donors becomes 27783, Solution. Here rate of increase of the number of blood & ) " (ono: it ix months) = 5% Let the number of units of time (six months) bem me oe Using V=V (ogy, lis 27783 = A000 1435)The time period = vil the Ina factory = ERR - ie a ye ie Production of motorbikes rose to 23328 from 20000 in 2 years. : ate of Growth of the production of motorbikes Solution. Let the rate of growth of the Production of motorbikes be r% per annum. Here, present producti = ae 000 motorbiee to" V = 23328 motorbikes and production 2 years earlier Using the formula, V = Vo(2 +B)’ me get 23328 = 20000{1.+ am) 100, 0 “ae S® Hence, the rate of growth of the produiction of motorbikes is 8% p.a Exatfiple9. The cost of a washing machine depreciates by 8720 during the second year and by €648 during the third year. Calculate : @ the rate of depreciation per annum (if) the original cost of the machine = x (Gi) the value of the machine at the end of third year. eg Solution. () Let the original cost of the washing machine be @ P and the rate of depreciation. ea ng of its value be r% p.a. Then, the value of the machine (in ) after one year, two years rkers 2 3 r 1 as and 3 years are »(1- ie) P(t-a} and (1-3) respectively. Given that the cost of the machine depreciates by € 720 during the second year and by © 648 during the third year, : (0-35) -P@-as) aug ; 3 a -—| =648 aber P(a- %) =» 1 a) eal send > PI 1-5 )(0- a = 720.and i | Pia i) J (-( tele ( = 0) I Taleo | = eee i LS iw) *7 100.oor”, ieefFe _ Um Pt | Mahindra set Ere (1-35) wig = 8 % @ Mere 5h and 4 calculate his Dividing @) by (0), we Bet gp) The value 0 ee 8 o1-be i will the vah 100 720 u 4a Mr. Durani ey a aay ‘The value 0 210% of the car ¢ Hence, the rate of depreciation of the value of machine = 10% p.a- ope (i) Putting r = 10 in (1), we get 1) (0 = x 2 = 720 > P= 8000. (Multiple € rr oe A 2 Hence, the original cost of the machine = = 8000. a re iy (ii) The value of the machine at the end of third year = © Pa = Bs) t ‘Oeu Ay (21510) if Subriti == 8000|1-<5 2 a ( isl interest, t is = % 9000 x (3) = 5832. @ %8 3 Ifaman EXERCISE EE) shen te @ @ J) The present population of a town is 200000, IS population increases by 10% in the me one fast year and 15% in the second year Find the population of the town at the end of aoe the two years. @z The present population of a town is 15625. Hf the population increases at the rate of 4% every yeat, what will be the increase in the population in next 3 years? 5 a ‘ e > The population ofa city increases each year by 496 of ‘what it had been at the beginning @e of cach year If its present population is 6760000, find + ie {0 its population 2 years hence (i) its population 2 years ago. o @. 1b The cost of a refrigerator is £9000. Ite value depreciates at the rate of 5% every yea er Find the total depreciation in its value at the end of 2 years. They § Dinesh purchased a scooter for €24000. The value of the scooter is depreciating at he oe rate of 5% per annum. Caleulate its value after 3 years. @ 6A on nol his output of wheat in his farm every year by 8%. This year he 2187 a guintals of wheat. What was the yearly produce of wheat two yeas Gum 7 The value of a property decreases every year at the rate of 5%. If its present yalue 5 © Simple 2411540, what was its value three years ago? rate of 8 Ahmed purchased an old scooter for 216000. If the cost of the scooter after a = ae depreciates to T1440, find the rate of depreciation. S Amou factory increased its production of cars from 80000 in the 1610" i year 2011-2012 to 92 © Simpl zy Find the annual rate of growth of production of cars. eles a 40 The value of a machine worth €500000 is depreciatis eat ie ne spreciating at the rate of 10% every ¥ i = a Ba many years will its value be reduced to ee ee 2 S haoed 5 A= pu an old motorbike for € 16000. If the value of the motorbike af i (or « 2 years is € 14440, find the rate of depreciation.“=Q) (“1 = 10) )% in the he end of re rate of eginning, ery year. ng at the year he Wo years value is. ter after 92610 in ery year. ike after Mahindra set up a factory by investing 2500000. Du iring the first two years, his profits were 5% and 10% respectively. If each year the profit was on previous year’s capital, calculate his total profit. o The value of a property is increasing at the rate of 25% every year. By what percent will the value of the property increase after 3 years? ‘Mr. Durani bought a plot of land for 180000 and a car for £320000 at the same time. The value of the plot of land grows uniformly at the rate of 30% p.a., while the value of the car depreciates by 20% in the first year and by 15% p.a. thereafter. If he sells the plot of land as well as the car after 3 years, what will be his profit or loss? = Multiple Choice Questions Choose the correct answer from the given four options (1 to 7): “1 The compound interest on % 1000 at 10% p.a. compounded annually for 2 years is @ 190 (& 200 (© F210 @ F1210 12 If Suksiti borrows “% 8000 for two years at the rate of 10% per annum compound interest, then the amount to be paid by her at the end of two years to clear the debt is (@) %8800 &) & 9600 © ©9680 (@ 102400 (3) Ifa man invests € 12000 for two years at the rate of 10% per annum compound interest, then the compound interest earned by him at the end of two years is (@) ©2400 (&) ©2520 (© €2000 (@ &1800 4 Mr. Rao bought 1-year, % 10000 certificate of deposit that paid interest at an annual rate of 8% compounded semi-annually. The interest received by him on maturity is (@ %816 © 364 (© 800 @ 210816 'B) The compound interest on & 5000 at 20% per annum for iy years compounded half-yearly is (@) ©6655 (b) & 1655 (© &1500 (a ©1565 6 If the number of conversion periods 2 2, then the compound interest is @) less than simple interest @) equal to simple interest (c) greater than or equal to-simple interest (d) greater than simple interest 7 The present population of a city is 12/00,000. If it increases at the rate of 8% every year, then the population of the city after 2. years is {a) 199680 (6) 1399680, (c) 1500000 (@) 1299680, CO Simple interest is the interest calculated on the original money (principal) at the given rate of interest for any given period. © In the simple interest, the principal remains constant for the whole loan period. © Amount = Principal + Interest: incipal x Rate Time O Simple interest = a el © In compound interest, the principal goes on changing every year (or any other fixed period). 2 OA=P (1455), where A = amount, P = principal, r = sate of interest per year (or conversion period) and m = number of years (or conversion periods).| Take a= 82, b= 52 Re NS ee 16.() 2,48 (ii) J2,/8 qcan be expressed as q = 251 : q Where m and» are non-negative integers fq are 2 or 5 or both only qhas a prime factor other than 2.and 5 irrational () Rational; prime factors o (ii) (i (iv) rational; prime factors of G are 2 or 5 or both only (@) tational; q has a prime factor other than 2 and 5 (ci) irrational rational; EXERCISE 2.1 L 4. 5. th 8. 10. 13. 14. . %8820; 820 2. (i) £1875 (ii) 750700 (iii) 2028 3. 7880; 210648 (@ %14080 (ii) %1408 Gif) 217036-80 () %5750 (i) 2710-70 6 12% (i) 12544 () 65% pa. (i) T5671 () 12% (ii) 2672 (iii) 27024-64. 9, €2541 ; 7541 %56243-20; 6243-20 Wi. &5724 ; 724 12, %23449-80 ; 76449-80 () 710560 (i) %11616 ii) T2016 (i) T1056 ;7105-60 (v) T1161-60 10648 ; 52648. 15. 2410 16, $4155 17. 730000 18. %26450 EXERCISE 2.2 L 4, 8 13. 19, 23, 27, 31, EXERCISE 2.3 1 6 $5618; 618. 2, €11712-80;%371280 3. 3774-625 5788-12; 2788-12 5, %103030-10; 3030-10 6. 212 7. 76-08 2142-40; %142-40 9, 492-25 10. %8000 11. 27500 12. %125000 270000 14.280 15. 42% 16.25% 17.5% 18. 10% 40% p.a 20. 5%; %92610 21. 5% ; ©4800 22. 10% ; 600 3 i)3 4 5. F250 3 years. 24, (i) 3 years (ii) 3 years 25. 15 years 26. %2500 @ 62% (i) ©3375 (iii) €256 28. 10000 29. %6000 30. 10% 4% p.aj®1875 32. Z21 33. €20000 34. £12000; 10% 25300 2. 1951 3. (i) 7311616 (éi) 6250000 4, 787750 5. 20577 1875 quintals 7. €480000. 8. 5% p.a- 9, 5%pa. 10. 3years 11. 5% pa. ew