Shortcut Trick
For quarterly compounding, the Time is 1 period (3 months = 1 quarter).
Rate for 1 quarter = 5% ÷ 4 = 1.25%.
Compound Interest = 1.25% of ₹ 8,000.
⇒ 8000 × (1.25/100) = 80 × 1.25 = ₹ 100.
∴ The correct answer is ₹ 100.
Alternate Method
Given:
Principal (P) = ₹ 8,000
Rate (R) = 5% per annum
Time (T) = 3 months
Formula Used:
For quarterly compounding: Rate (r) = R/4 and n = T(in years) × 4
Amount (A) = P(1 + r/100)n
Calculations:
⇒ r = 5/4 = 1.25%
⇒ n = (3/12) × 4 = 1 quarter
⇒ A = 8000 × (1 + 1.25/100)1
⇒ A = 8000 × (101.25/100)
⇒ A = 80 × 101.25 = ₹ 8,100
⇒ Compound Interest (CI) = A − P
⇒ CI = 8100 − 8000 = ₹ 100
∴ The correct answer is ₹ 100.
Additional Information
Quarterly Compounding Rule
When interest is compounded quarterly, the annual rate is divided by 4 and the number of years is multiplied by 4.
Half-Yearly Compounding
When interest is compounded half-yearly, the annual rate is divided by 2 and the time in years is multiplied by 2.
CI for 1st Period
For the very first compounding period, the Simple Interest and Compound Interest are always equal.