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COMPOUND INTEREST - (ENGLISH)

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Preparing for Compound Interest Questions in Quantitative Aptitude Test

Compound interest is another important terminology that everyone needs to understand; not just to quality a career aptitude test, rather it is also important to manage your finances. Compound interest terminology can help you determine how to ensure higher returns on your investments or savings. 

There are so many interesting things to know about this concept. If you are preparing for some aptitude test, it is better to practice questions related to this section more often. The idea is to ensure proper flow with recommended formulas; accuracy must be your prime target, but at the same time, it needs proper utilization of time. If you want to crack an aptitude test online, it is better to go through the details below. In this article, we have defined a few essential terms related to compound interest.

What is compound interest?

Compounding, in simple words, can be defined as a process of growing. In case if you know about the snowball effect, you can easily solve the problems related to this concept. Note that, compound interest is in simple terms can be defined as interest earned on money that is already earned in the form of interest. With this cycle, the interest keeps on increasing, and the account is balanced at some increased interest rate. You can consider it something like exponential growth.

In order to understand the concept of compound interest, it is first important to start with simple interest. For example, you deposit money in the bank and then as per set interest rate policy, they will keep on adding some interest on your deposit. Let us consider that your deposited amount is $100, and the annual interest rate is 5%; it means, after one year, you will earn $5.

After this, we can consider the concept of compounding. In this case, you can earn interest on the initial deposit as well as on the interest that you have earned previously. It means you will first earn 5% on the original deposit amount of $100 and then 5% on the new $5 that you recently obtained from the bank as per their policy.

Compound Interest in Quantitative Aptitude questions:

There are so many methods to calculate compound interest. It can help you to achieve higher scores with ease in career aptitude tests. The basic formula for calculating compound interest is given below:

A = P (1 + [R / N]) ^ NT

Here: A stands for the amount that you need to calculate.

P = Initial deposit made by the person; it is also known as Principle.

R = Rate of interest that is calculated annually.

N = Number of compounding periods on a yearly basis. For instance, it can be 52 weeks or 12 months.

T = Total time for which money is compounded.

You can also find several short cuts to solve these problems so that more questions can be solved in lesser time while appearing in an aptitude test.

Candidates preparing for following competitive exams can utilize Aptitude section to improve their skills.

  • Bank Competitive Exam
  • MPSC Competitive Exams
  • SSC Competitive Exams
  • L.I.C/ G. I.C Competitive Exams
  • Railway Competitive Exam
  • University Grants Commission (UGC)
  • NET/ SET Competitive Exam
  • Common Aptitude Test (CAT)
  • Career Aptitude Test (IT Companies)

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