(Guidance Programme) Combined Higher Secondary Level [CHSL]
(10+2) Exam : Compound Interest
In compound interest, the interest is added to the principal at the end of
each period and the amount thus obtained becomes the principal for the next
period. The process is repeated till the end of the specified time.
If P = Principal,
R = Rate per cent per annum
Time = Number of years,
A = Amount. Then,
When the interest is compounded annually
1. If the rate of interest differs from year to year ie, R1 in the first
year, R2 in the second year, R3 in the third year.
2. When the principal changes every year, we say that the interest is
compounded annually. Then,
3. When the principal changes as per every six months, we say that the
interest is compounded half yearly or semi-annually. Then,
4. When the principal changes every three months, we say that the interest is
compounded quarterly. Then,
5. When the principal changes after every month, we say that the interest is
compounded monthly. Then,
6. When the interest is compounded annually but time is in fraction say year.
7. The difference between the simple interest and compound interest for 2
year (or terms) is given by the formula
Where D is the difference, P is the principal and R is the rate of interest.
8. Present worth of x ` due n years, hence is given by