Shortcut Trick
Interest for the 1st year = 10% of 50,000 = Rs. 5,000.
In Compound Interest, the interest earned each subsequent year grows successively by the rate percentage.
Interest for 3rd year = Interest for 1st year × (1 + 10/100)2
Interest for 3rd year = 5000 × 1.1 × 1.1 = 6050
∴ The correct answer is Rs. 6,050.
Alternate Method
Given:
Principal (P) = Rs. 50,000
Rate (R) = 10% per annum compound interest
Time period = 3rd year
Formula Used:
Interest for a specific year is calculated on the total amount accrued up to the previous year.
50k
Start
55k
Year 1
60.5k
Year 2
66.55k
Year 3
I&sub3; = 6050
Calculation:
⇒ Interest for 1st year = 10% of 50,000 = Rs. 5,000
⇒ Amount after 1st year = 50,000 + 5,000 = Rs. 55,000
⇒ Interest for 2nd year = 10% of 55,000 = Rs. 5,500
⇒ Amount after 2nd year = 55,000 + 5,500 = Rs. 60,500
⇒ Interest for 3rd year = 10% of 60,500 = Rs. 6,050
∴ The correct answer is Rs. 6,050.
Additional Information
Successive Increment in CI
In compound interest, the interest earned each successive year forms a geometric progression with a common multiplier of (1 + R/100).
Compound Interest Total Amount Formula
The total amount after n years is directly calculated as A = P(1 + R/100)n, where P is the principal and R is the rate of interest.
Difference Between SI and CI (2 Years)
The difference between compound interest and simple interest for exactly two years is derived using the formula: Difference = P(R/100)2.