Long Method:-
In this method the Compound Interest is calculated year by year. The interest for the first year is calculated, added to principal and we get the amount for first year. The amount obtained is then used as principal for second year and amount obtained in second year is used as principal for third year and so on.
Advantages of this method:-
1) It is non confusing and is easy to use.
2) It provides the student with neatness, since you may not scribble while using this method.
Disadvantages of this method:-
1) It is very time taking method.
2) It is an old method and not preferred in modern days.
How it is done?
Formula:- If you remember the formula used in calculating Simple Interest this method is waiting for you, but if you don't here it is:-
Formula to calculate interest:-
Interest = Principal x Rate x Time(1 year can be neglected)
100
Principal = Interest x 100 (Time can be neglected)
Rate
Rate = Interest x 100 (Time can be neglected)
Principal
Example Problems:-
1) Calculate the amount and compound interest for Rs. 40,000 at an rate of 5% per year for 3 years.
A) Principal (P) = Rs.40000
Rate (R) = 5%
Time (T) = 3 years
Interest (I) for the first year:-
I = P x R x T
100
I = 40000 x 5 x 1
100
I = 2000 x 1 = Rs.2000
Amount (A) = P + I
= 40000 + 2000
= Rs. 42000
I for second year :-
P = Rs. 42000
I = 42000 x 5
100
I = Rs. 2100
A = 42000 + 2100
= Rs. 44100
I for third year :-
P = Rs.44100
I = 44100 x 5
100
I = Rs. 2205
A = 44100 + 2205
= Rs. 46305
Amount at the end of three years is Rs. 46305
Interest at end of three years is Rs. 6305 (A at end of 3 years - P)
In calculating P or R we use use their respective formulas.
Note :- Its all about substituting right values is right formulas.
ALL DOUBTS IN THE COMMENTS AND WITHIN 48 HOURS YOU WILL RECEIVE CLARIFICATION.
ALL DOUBTS IN THE COMMENTS AND WITHIN 48 HOURS YOU WILL RECEIVE CLARIFICATION.
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