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# 1/16/2017 Mrunal[Aptitude]CompoundInterestRate,PopulationGrowthwithoutFormulasMrunal

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[Aptitude]CompoundInterestRate,PopulationGrowth
withoutFormulas

Introduction
Case:Cityspopulation:Growth
Case:CitysPopulation:Decline
Case:Bankscompoundinterestrate(CI)
Case:CIFindingNemoPrincipal
Case:CompoundingTwiceaYear
Case:Compoundingthriceayear
Approach1:Alligiationloop
Approach#2:CompoundInterest
Case:Simpleinterestrate(SI)
Case:SIFindingPrincipal
PracticeQuestionsforCI/SI
SidenoteonIBPS(BankPO)
VerbalSidenote:

Introduction
CI/PopulationgrowthisnotaseparatetheorybyitselfbutmereanextensionofPercentage
calculationtheory.Hencefollowingthreequestionscanbesolvedwithoneandsameapproach,
withouthavingtomugupthreeseparateformulas

Acityhas10,000residents.Itspopulationgrowsattherateof10%perannum,whatllbeitstotal
populationafter5years?
Abankoffers10%interestratecompoundedannually,ifyoudepositRs.10,000today,whatllbe
thetotalamountinyoursavingsaccountafter5years?
Abutlersteals10mlofwhiskeyfrom100mlbottleandreplacesitwithwater.Herepeatsthis
process5moretimes,howmuch%whiskyisleftinthebottle?
First,mastertheFractiontablemethodof%calculation:

%Form Fractionform %Form FractionForm

## 20% 1/5 80% 4/5

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1/16/2017 Mrunal[Aptitude]CompoundInterestRate,PopulationGrowthwithoutFormulasMrunal

25% 75%

## 50% 50% haha

Case:Cityspopulation:Growth
Acityhas10,000residents.Itspopulationgrowsattherateof10%perannum,whatllbeitstotal
populationafter5years?

10%increase
=100%+10%
=110%
Butifwetalkinfractionform:100%=1and10%=1/10
Hence
10%increase
=1+1/10
=11/10

Afterfirstyear
Thenewpopulationafter1year,willbe11/10timestheoriginal
=(11/10)*originalweknowthatoriginallythereare10,000resident.Butnoneedtocalculatethat
rightnow.
Thisisourneworiginal:

Aftersecondyear
Thenewpopulationwillbe11/10timestheoriginalpopulationattheendoffirstyear
=11/10*[(11/10)*original]

Afterthirdyear
Thenewpopulationwillbe11/10timestheoriginal
=11/10[11/10[(11/10)*original]]

Continuinglikethis,whatwegetafter5yearsis
aptitudeCSATCMATCATIBPS

CASE:CitysPopulation:Decline
Acityhas10,000residents.Itspopulationdeclinesattherateof10%perannum,whatllbeits
totalpopulationafter5years?
Decline=decrease
=100%10%

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=1(1/10)
=9/10

Populationafter5years
aptitudeCSATCMATCATIBPS

Case:Bankscompoundinterestrate(CI)
Abankoffers10%interestratecompoundedannually,whatllbethetotalamountinyoursavings
accountafter5years?
Itissimple:usethesametrickusedinpopulationcase
100%+10%
=1+(1/10)
=11/10

Moneyinyouraccountafter5years
aptitudeCSATCMATCATIBPS

Rs.16105isthetotalamountinyourbankaccount.

Howmuchinterestdidyouearn?
=16105minus10000=Rs.6105earnedininterest.

Case:CIFindingNemoPrincipal
ininterest.Howmuchmoneydidhedepositinitially?

Principal=Themoneyyoudepositinitially.SupposehedepositedRs.M
After3yearshegot(M+3310)
10%compoundinterestrateforthreeyearsmeans
(Seethecalculationinfollowingpicture)
aptitudeCSATCMATCATIBPS

Case:CompoundingTwiceaYear
YoudepositedRs.10,000@10%annualcompoundinterestrateinSBI.Iftheinterestrateis
compoundedaftereach6months,howmuchmoneywillbethereinyouraccountafter3years?

Important:Wheninterestiscompoundedhalfyearly,theinterestratewillbehalfofthe
annualinterestrate.(NCERTclass8Mathtextbook)
Sotheeffectiveinterestrate
=halfof10%
=5%

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Thuspercentageincrease
=100%+5%
=1+(1/20)
=21/20

After6months
=21/20timestheoriginalamount
Thisbecomesourneworiginal

Afteranother6months
=21/20timestheneworiginal
=21/20x[(21/20)xoriginal]

1yearhastwoblocksof6months[6+6=12months]3yearshas3x2=6blocksof6months
Thereforewevetodothisinterestratecalculation6timesbecausethereare6blocks.
Amountinyourbankaccountafter3years
aptitudeCSATCMATCATIBPS

Case:Compoundingthriceayear
Rs.10,000,10%annualinterestrate,compoundedthriceayear.

Sinceitiscompoundedthriceayear,henceeffectiveinterestrateisonethirdof10%=(10/3)%
Percentageincrease
=100%+(10/3)%
=1+(10/300)
=1+(1/30)
=31/30

1yearhas3blocksof4months[3x4=12months]3yearshave9blocksof4months[3x4x3
=36months=3years]

Amountafter3years
aptitudeCSATCMATCATIBPS

Abutlersteals10mlofwhiskeyfrom100mlbottleandreplacesitwithwater.Herepeatsthis
process5moretimes,howmuch%whiskyisleftinthebottle?

Thisisagainacompoundinterestrateproblem.ButtheamountdoesntincreaselikeinBanks
savingsaccount.BecauseButlermakessurethatvolumeremains100mlaftereveryreplacement.

Approach1:Alligiationloop
ProceedwiththetechniqueyoulearnedinMixtureAlligiationarticle.

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aptitudeCSATCMATCATIBPS

Recallthatvisualmove
100M=10ml.(1)
M0=90ml.(2)
Divide(1)with(2)
aptitudeCSATCMATCATIBPS

ThereforeM=90
Meansnewmixturecontains90%wine.
Thisis1sttimestealing.Butlerisgoingtodothis4timesmore.
Situation:Nowbottlecontains100mlmixturecontaining90%wine,Butlersteal10mlfromitand
Repeatthesamealligiation
aptitudeCSATCMATCATIBPS

aptitudeCSATCMATCATIBPS

Sinceitcontains100mlmixture,soabsolutevalue(Quantity)is100x59.05%=59.05ml
Thiswasquitelengthy,tiresomeandtimeconsumingapproach,wasntit?
Bettertrysecondapproachusingcompoundinterestconcept.

Approach#2:CompoundInterest
Abutlersteals10mlofwhiskeyfrom100mlbottleandreplacesitwithwater.Herepeatsthis
process5moretimes
Butlerisstealing10mloutof100mleverytime.Sopercentagewiseheisstealing10/100=10%of
contenteverytime.
Whatisleft:
100%10%
=90%
=9/10

Runthisloop5times
aptitudeCSATCMATCATIBPS

Atankerisfullofmilk,25%oftheliquidisstolenandreplacedwithwater.Ifthisprocessis
repeated4timesandultimatemixturecontains810litresofmilk,whatisthetotalcapacityofthis
tanker?

25%isstolensowhatisleft?
100%25%

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=75%
=3/4
Loopthis4times
aptitudeCSATCMATCATIBPS

milkleftinthetanker

Whatisthefinalconcentrationofmilkinthistanker?
Totalcapacityoftankeris2560lt.
Andweknowthat810lt.ofmilkisleft.
So%wise(810/2560)*100=31.64%milkisleftinthetanker.

CASE:Simpleinterestrate(SI)
Rs.10,000@10%annualsimpleinterestrate,Howmuchinterestdoyouearnafter3years?

Nobrainer!Insimpleinterestrate,yougetinterestonlyontheinitialPrincipal(Rs.10000inour
case)
Threeyears=youearninterestthreetimes
Howmuchinterestdoyouearnin1year?
=10%of10000
=(1/10)x10000
=1000
Repeatthisprocessthreetimes,whatdoyouget?:1000x3=Rs.3000

Case:SIFindingPrincipal
Youdepositedsomemoneyinbank,afterthreeyearsyougetbackRs.13,000@10%simple
interestrate.WhatwasthePrincipal?
SupposeyourPrincipalisRs.M
Eachyearyouget10%ofMininterest
=10%M
=(1/10)xM
InThreeyearsyouget=3x(1/10)xMininterest
=Principal+interestforthreeyears
=M+3x(1/10)xM
=M+(3/10)M
=(13/10)M
(13/10)M=13000
M=13000x(10/13)=10000

VerbalSidenote:
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VerbalSidenote:
1/16/2017 Mrunal[Aptitude]CompoundInterestRate,PopulationGrowthwithoutFormulasMrunal

ItisPrincipalandNotPrinciple
Principle=rule/maxim/siddhant/Niyam/usool()
Principal=Main/chief/moneydepositedinitially.
InthemovieAgnipath,HrithikRoshansfatherDinanathMasterwasaschoolteacherandnota
principal,buthedidnotcompromisewithhisprinciplessoSanjayDuttkilledhim.

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