Mrunal (Aptitude) Compound Interest Rate, Population Growth Without Formulas

Mrunal [Aptitude] Compound Interest Rate, Population Growth without F...
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[Aptitude] Compound Interest Rate, Population Growth without Formulas

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Introduction
Case: Citys population: Growth
Case: Citys Population: Decline
Case: Banks compound interest rate(CI)
Case: CI Finding Nemo Principal
Case: Compounding Twice a Year
Case: Compounding thrice a year
Case: Wine Replacement (Adulteration)
Approach 1: Alligiation loop
Approach #2: Compound Interest
Case: AdulterationFinding Original volume
Case: Simple interest rate (SI)
Case: SI Finding Principal
Practice Questions for CI/SI
Sidenote on IBPS (Bank PO)
Verbal Sidenote:
Introduction
CI/Population growth is not a separate theory by itself but mere an extension of
Percentage calculation theory. Hence following three questions can be solved with one
and same approach, without having to mugup three separate formulas
A city has 10,000 residents. Its population grows at the rate of 10% per annum,
whatll be its total population after 5 years?
A bank offers 10% interest rate compounded annually, if you deposit Rs. 10,000
today, whatll be the total amount in your savings account after 5 years?
A butler steals 10 ml of whiskey from 100 ml bottle and replaces it with water. He
repeats this process 5 more times, how much % whisky is left in the bottle?
First, master the Fraction table method of % calculation:
The ready reference Table

% Form Fraction form
% Form Fraction Form
10%
90%
1/10
9/10
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20%
1/5
80%
4/5
25%
75%
30%
3/10
70%
7/10
33.33%
1/3
66.66%
2/3
40%
2/5
60%
3/5
50%
50%
haha
Case: Citys population: Growth

A city has 10,000 residents. Its population grows at the rate of 10% per annum, whatll
be its total population after 5 years?
10% increase
=100% we have already + 10% new is added
=100%+10%
=110%
But if we talk in fraction form: 100% = 1 and 10%=1/10
Hence
10% increase
=1+1/10
=11/10
After first year

The new population after 1 year, will be 11/10 times the original
=(11/10)*original ; we know that originally there are 10,000 resident. But no need to
calculate that right now.
This is our new original:
After second year

The new population will be 11/10 times the original population at the end of first year
=11/10*[(11/10)*original]
After third year

The new population will be 11/10 times the original
=11/10 [11/10 [(11/10)*original]]
Continuing like this, what we get after 5 years is
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CASE: Citys Population: Decline

A city has 10,000 residents. Its population declines at the rate of 10% per annum,
whatll be its total population after 5 years?
Decline = decrease
=100%-10%
=1-(1/10)
=9/10
Population after 5 years
Answer. After 5 years, citys population will be 5904.
Case: Banks compound interest rate(CI)

A bank offers 10% interest rate compounded annually, whatll be the total amount in
your savings account after 5 years?
It is simple: use the same trick used in population case
100%+10%
=1+(1/10)
=11/10
Money in your account after 5 years
Rs.16105 is the total amount in your bank account.
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How much interest did you earn?

= 16105 minus 10000 =Rs. 6105 earned in interest.
Case: CI Finding Nemo Principal

A man had deposited some money in SBI compounded 10% annually. After 3 years he
got Rs.3310 in interest. How much money did he deposit initially?
Principal = The money you deposit initially. Suppose he deposited Rs.M
After 3 years he got (M+3310)
10% compound interest rate for three years means
(See the calculation in following picture)
Final Answer: Principal was Rs. 10000
Case: Compounding Twice a Year

You deposited Rs.10,000 @10% annual compound interest rate in SBI. If the interest
rate is compounded after each 6 months, how much money will be there in your
account after 3 years?
Important: When interest is compounded half yearly, the interest rate will be half of
the annual interest rate. (NCERT class 8 Math textbook)
So the effective interest rate
= half of 10%
=5%
Thus percentage increase
=100%+5%
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=1+(1/20)
=21/20
After 6 months
=21/20 times the original amount
This becomes our new original
After another 6 months

=21/20 times the new original
=21/20 x [(21/20) x original]
Now think about it
1 year has two blocks of 6 months [6+6=12 months]
3 years has 3 x2=6 blocks of 6 months
Therefore weve to do this interest rate calculation 6 times because there are 6 blocks.
Amount in your bank account after 3 years
Case: Compounding thrice a year

Rs.10,000, 10% annual interest rate, compounded thrice a year.
Since it is compounded thrice a year, hence effective interest rate is one third of 10%=
(10/3)%
Percentage increase
=100%+ (10/3)%
=1+(10/300)
=1+(1/30)
=31/30
1 year has 3 blocks of 4 months [3 x 4 =12 months]
3 years have 9 blocks of 4 months [3 x 4 x 3 =36 months = 3 years]
Amount after 3 years
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CASE: Wine Replacement (Adulteration)

repeats this process 5 more times, how much % whisky is left in the bottle?
This is again a compound interest rate problem. But the amount doesnt increase like in
Banks savings account. Because Butler makes sure that volume remains 100ml after
every replacement.
Approach 1: Alligiation loop

Proceed with the technique you learned in Mixture Alligiation article.
Recall that visual-move

100-M=10ml.(1)
M-0=90ml.(2)
Divide (1) with (2)
Therefore M=90
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Means new mixture contains 90% wine.

This is 1st time stealing. Butler is going to do this 4 times more.
Situation: Now bottle contains 100 ml mixture containing 90% wine, Butler steal 10 ml
from it and adds 10 ml fresh water.
Repeat the same alligiation
Final answer: after five repetitions, the concentration of wine left in bottle (quality) =
59.05%
Since it contains 100 ml mixture, so absolute value (Quantity) is 100 x
59.05%=59.05ml
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This was quite lengthy, tiresome and time consuming approach, wasnt it?
Better try second approach using compound interest concept.
Approach #2: Compound Interest

repeats this process 5 more times
Butler is stealing 10ml out of 100 ml everytime. So percentage wise he is stealing
10/100=10% of content everytime.
What is left:
100%-10%
=90%
=9/10
Run this loop 5 times
Case: AdulterationFinding Original volume

A tanker is full of milk, 25% of the liquid is stolen and replaced with water. If this
process is repeated 4 times and ultimate mixture contains 810 litres of milk, what is the
total capacity of this tanker?
25% is stolen so what is left?
100%-25%
=75%
=3/4
Loop this 4 times
milk left in the tanker
What is the final concentration of milk in this tanker?
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Total capacity of tanker is 2560 lt.

And we know that 810 lt. of milk is left.
So % wise (810/2560)*100=31.64% milk is left in the tanker.
CASE: Simple interest rate (SI)

Rs.10,000 @10% annual simple interest rate, How much interest do you earn after 3
years?
No brainer! In simple interest rate, you get interest only on the initial Principal
(Rs.10000 in our case)
Three years = you earn interest three times
How much interest do you earn in 1 year?
=10% of 10000
=(1/10) x 10000
=1000
Repeat this process three times, what do you get?: 1000 x 3 = Rs.3000
Case: SI Finding Principal

You deposited some money in bank, after three years you get back Rs.13,000 @10%
simple interest rate. What was the Principal?
Suppose your Principal is Rs.M
Each year you get 10% of M in interest
=10% M
=(1/10) x M
In Three years you get = 3 x (1 /10) x M in interest
Total amount you receive after three years
=Principal + interest for three years
=M + 3 x (1 /10) x M
=M+ (3/10)M
=(13/10)M
But it is given that you received Rs.13000 so,
(13/10)M=13000
M=13000 x (10 /13)= 10000
Answer. Your Principal =Rs.10000
Verbal Sidenote:
It is Principal and Not Principle
Principle = rule /maxim / siddhant/ Niyam/usool ()
Principal =Main/ chief/money deposited initially.
In the movie Agnipath, Hrithik Roshans father Dinanath Master was a schoolteacher
and not a principal, but he did not compromise with his principles so Sanjay Dutt
killed him.
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URL to article: http://mrunal.org/2012/04/aptitude-compound-interest-rate.html

Posted By Mrunal On 30/04/2012 @ 17:27 In the category Aptitude
7/28/2014 10:22 AM

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Mrunal [Aptitude] Compound Interest Rate, Population Growth without F...

[Aptitude] Compound Interest Rate, Population Growth without Formulas

The ready reference Table

% Form Fraction Form