Simple compound interest & Sales tax

Simple Interest:

·                     Let Principle = P, Rate = R% per annum (p.a.) and Time = T years. Then,

(i)            S.I. =  PRT/100

Compound Interest:

·                     Let Principal = P, Rate = R% per annum, Time = n years.

(I)                  When interest is compound Annually:  Total  amount = P ( 1 + R/100)n

(II)                When interest is compounded Half-yearly: Total amount = P( 1 + R/200)2n

(III)              When interest is compounded annually but time is in fraction, say  3 2/5 years.

Compound interest


(IV)              When Rates are different for different years, say  R1 %, R2%, R3 % for 1st, 2nd, and 3rd year respectively.

Then, Amount = P ( 1 + R1/100)(1 + R2/100)(1+ R3/100)

CI - SI (for 2 years) = PR2/100x100


Sales Tax

Calculation of Sales Tax

·                     The price marked on an article is called its marked price or list price.

·                     The price at which an article is offered to the customer is called its sale price.

·                     The sales tax is always calculated on the sale price of the article.

(i)     When no discount is given, marked price of the article becomes the sale price, and sales tax is calculated on it.

(ii)     When discount is given, we first calculate the sale price as under:

Sale Price = (Marked Price) – (Discount)



· Capital: The total amount of money needed to run the company is called the capital.

Shares: The whole capital is divided into small units, called shares.

Dividend: The annual profit distributed among share holders is called dividend.


Nominal Value of a Share (N.V.):

·                     The value of a share printed on the share certificate is called its Nominal Value or Face Value or Par Value.

·                     Dividend is always reckoned on the face value of a share.


Market Value of a Share (M.V.):

·     The shares of different companies can be bought or sold in the market through stock-exchange.

·     The price at which the share is sold or purchased in the market through stock exchange is called its Market Value.


A share is said to be:

·(i)            At premium or above par, if its market value is more than its face-value.

(ii)                 At par, if its market value is the same as its face value.

(iii)                At Discount or below par, if its market value is less than its face-value.


(i)       If Rs 100 share is quoted at a premium of Rs 24, then

Market Value of 1 share = Rs (100 + 24) = Rs 124.

(ii)       If Rs 25 share is quoted at a discount of Rs 7, then

Market Value of 1 share = Rs (25 – 7) = Rs 18.

Some Important Concepts:

(i)                   The face value of a share always remains the same.

(ii)                 The market value of a share changes from time to time.

(iii)                Dividend is always paid on the facee value of a share.

(iv)                Number of shares held by a person


Example: 9% Rs 100 share at Rs 120 means:

(i)                   Face Value (N.V.) of 1 share = Rs 100.

(ii)                 Market Value (M.V.) of 1 share = Rs 120.

(iii)                Annual Dividend on 1 share = 9% of its Face Value = 9% of Rs 100 = Rs 9.

(iv)                An investment of Rs 120 gives an annual income of Rs 9.

(v)                 Rate of return p.a. = Annual income from an investment of Rs 100