Shortcut #1 to compute interest:
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We all know the traditional formula to compute interest…
CI = P*(1+R/100)^N – P
The calculation get very tedious when N>2 (more than 2 years). The method suggested below is elegant way to get CI/Amount after ‘N’ years.
You need to recall the good ol’ Pascal’s Triange in following way:
Code:
Number of Years (N)
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1 1
2 1 2 1
3 1 3 3 1
4 1 4 6 4 1
. 1 …. …. … … 1
Example: P = 1000, R=10 %, and N=3 years. What is CI & Amount?
Step 1: 10% of 1000 = 100, Again 10% of 100 = 10 and 10% of 10 = 1
We did this three times b’cos N=3.
Step 2:
Now Amount after 3 years = 1 * 1000 + 3 * 100 + 3 * 10 + 1 * 1 = Rs.1331/-
The coefficents – 1,3,3,1 are lifted from the pascal’s triangle above.
Step 3:
CI after 3 years = 3*100 + 3*10 + 3*1 = Rs.331/- (leaving out first term in step 2)
If N =2, we would have had, Amt = 1 * 1000 + 2 * 100 + 1 * 10 = Rs. 1210/-
CI = 2 * 100 + 1* 10 = Rs. 210/-
This method is extendable for any ‘N’ and it avoids calculations involving higher powers on ‘N’ altogether!
A variant to this short cut can be applied to find depreciating value of some property. (Example, A property worth 100,000 depreciates by 10% every year, find its value after ‘N’ years).