Calculating Compound Interest

The video tutorial explains how to calculate compound interest for an investment of ₹20,000 at 1.5% per annum over three years. It distinguishes between compound and simple interest, demonstrates converting 1.5% to a decimal, and applies the compound interest formula using a power for efficiency. The final amount is calculated and rounded to the nearest rupee, with a detailed explanation of each step and the marks awarded for correct calculations.

What is the main difference between compound interest and simple interest?

• Simple interest accumulates each year on the new value.

• Compound interest accumulates each year on the new value.

• Simple interest is calculated on the new value each year.

• Compound interest is calculated on the initial principal only.

How do you express 1.5% as a decimal?

• 0.015

• 1.5

• 0.15

• 0.0015

What is the initial amount Hiran invests in the account?

• ₹30,000

• ₹20,000

• ₹25,000

• ₹15,000

Why do we multiply by 1.015 in the calculation?

• To add 1.5% to the original amount.

• To add 15% to the original amount.

• To subtract 15% from the original amount.

• To subtract 1.5% from the original amount.

What is the shortcut method used to calculate compound interest for multiple years?

• Subtracting the interest rate from the principal each year.

• Multiplying the principal by the interest rate each year.

• Using the power method with the number of years as the exponent.

• Adding the interest rate to the principal each year.

What is the final amount in the account after three years, rounded to the nearest rupee?

• ₹20,912

• ₹20,915

• ₹20,914

• ₹20,913

How many marks are awarded for setting up the correct calculation?

• One mark

• Two marks

• Four marks

• Three marks