UNDERSTANDING THE CONCEPT OF COMPOUND INTEREST AND FORMULA.

In compound interest, the interest for each period is added to the principle before interest is calculated for the next period. With this method the principle grows as the interest is added to it. This method is mostly used in investments such as savings account and bonds.


Understanding the concept of Compound Interest, Compound Interest formula for exams, shortcut formula of exams, Compound interest and shortcut methods, important tricks for compound interest/simple interest for bank and other exams, compound interest problems 

1) A = P + CI	2) CI = A – P
3) A = P*(1 + r/100)t	4) CI = P*[(1 + r/100)t – 1]

   5) If a certain sum of money becomes n times in t years then
       Time taken to be na times = a*t.

To understand compound interest clearly, let’s take an example.

1000 is borrowed for three years at 10% compound interest. What is the total amount after three years?
You can understand the process of compound interest by image shown below.

Year	Principle	Interest (10%)	Amount
1st	1000	100	1100
2nd	1100	110	1210
3rd	1210	121	1331

Difference between Simple Interest and compound interest
After three years,
In simple interest, the total amount would be 1300
And in compound interest, the total amount would be 1331.
Some Basic Formulas
If A = Amount
P = Principle
C.I. = Compound Interest
T = Time in years
R = Interest Rate Per Year


Shortcut Formulas 
Rule 1: If rate of interest is R1% for first year, R2% for second year and R3% for third year, then

Rule 2: 
If principle = P, Rate = R% and Time = T years then

1. If the interest is compounded annually: 
2. If the interest is compounded half yearly (two times in year):
3. 1. If the interest is compounded half yearly (two times in year):
   2. If the interest is compounded quarterly (four times in year):
   
   Rule 3: If difference between Simple Interest and Compound Interest is given.
   
   
   • If the difference between Simple Interest and Compound Interest on a certain sum of money for 2 years at R% rate is given then
   
   
   • If the difference between Simple Interest and Compound Interest on a certain sum of money for 3 years at R% is given then
   
   Rule 3: If sum A becomes B in T1 years at compound interest, then after T2 years
   
   
   
   
   Find Compound Interest Tricks
   In case of Compound Interest the interest is vary according to time but the first year it is equal that is 1st year Interest is
   
   Compound Interest = Simple Interest.
   But after that year it is increases. So we can find Compound interest using tricks. This type of problem are given in Quantitative Aptitude which is a very essential paper in banking exam.Under below  given some more example for your better practice.