Shortcut Trick
Quarterly Rate = 20% ÷ 4 = 5% (fractional value = 1/20)
For 1 year (4 quarters), the Ratio of Principal to Amount = 204 : 214
⇒ 1,60,000 : 1,94,481 | Interest units = 1,94,481 − 1,60,000 = 34,481
⇒ Given 1,60,000 units = ₹4,80,000 → 1 unit = ₹3
⇒ Compound Interest = 34,481 × 3 = ₹1,03,443
∴ The correct answer is ₹1,03,443.
Alternate Method
Given: Principal (P) = ₹4,80,000 | Rate (R) = 20% p.a. | Time (T) = 1 Year
Formula Used: A = P(1 + r/100)n and CI = A − P
⇒ Quarterly Rate (r) = 20% ÷ 4 = 5%
⇒ Number of Quarters (n) = 1 × 4 = 4
⇒ Amount (A) = 4,80,000 × (1 + 5/100)4
⇒ A = 4,80,000 × (21/20)4
⇒ A = 4,80,000 × (194481/160000)
⇒ A = 3 × 1,94,481 = ₹5,83,443
⇒ Compound Interest = 5,83,443 − 4,80,000 = ₹1,03,443
∴ The correct answer is ₹1,03,443.
Additional Information
Quarterly Compounding Rule
When interest is compounded quarterly, the annual rate is divided by 4 (R/4) and the time in years is multiplied by 4 (4T).
Effective Rate of Interest
For 4 periods of 5% each, the effective rate is roughly 21.55% (calculated as [(1.05)4 − 1] × 100).
Successive Percentage Shortcut
For two periods, effective rate = x + y + (xy/100). For 5% and 5%, it is 10.25%. For four periods, apply this twice to 10.25%.