Rule of 72 for Compound Interest :
t = 72/R (The value is a close approximation)
t is the time taken for an amount to Double
R is the Rate of Interest
Example: In how many years will an amount X double at 20% p.a.??
t = 72/20 = 3.6 years
Difference Between Compound Interest(CI) & Simple Interest (SI):
When T = 2 years:
Example: If the difference between CI and SI is Rs.10, for a period of 2 years and for a principal of Rs.1000 then find the rate of interest?
10=1000 x (R/100)^2
Therefore R = 100 %
When T = 3 years:
CI -SI=[(PR)^2/(10)^4] * ((300+R)/100 )
CI-SI= SI/3 * [(R/100)^2 + (3R/100)]
Example: If the difference between CI and SI is 100 for a period of 3 years at a rate of interest of 100 percent p.a. then find the Simple Interest(SI)?
100=SI/3 * [(100/100)^2 + (3×100/100)] Therefore SI = 300/4 = Rs.75
When Money Becomes “N” times:
Example: In how many years will an amount become 6 times of it, at a rate of interest of 10% p.a.?
10 x T = (6-1) x 100 ; T = 500/10 = 50 years
Example: An amount becomes 8 times of it in 3 years Compounded annually. Find the Rate of Interest?
R = 100 X [8^(1/3) -1] = 100 [2 – 1] = 100 %