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 Compound Interest Questions

Popular Latest Rated Important Formulae

FACTS  AND  FORMULAE  FOR  COMPOUND  INTEREST  QUESTIONS

 

 

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

I.

1.  When interest is compound Annually:

Amount =P1+R100n

2.  When interest is compounded Half-yearly:

Amount = P1+(R2)1002n

3.  When interest is compounded Quarterly:

Amount = P1+R41004n

 

II.

1.  When interest is compounded Annually but time is in fraction, say 325 years.

Amount = P1+R1003×1+25R100

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

Then, Amount = P1+R11001+R21001+R3100

 

III.  Present worth of Rs. x due n years hence is given by:

Present Worth = x1+R100n

Q:

Find the principal if the interest compounded at the rate of 10% per annum for two years is Rs. 420 ?

A) Rs. 2000 B) Rs. 2100
C) Rs. 1900 D) Rs. 2150
 
Answer & Explanation Answer: A) Rs. 2000

Explanation:

Given,
Compound rate, R = 10% per annum
Time = 2 years
C.I = Rs. 420
Let P be the required principal.
A = (P+C.I)
Amount, A = P1 + r100n

(P+C.I) = P1 + 101002

(P+420) = P[11/10][11/10]

P-1.21P = -420

0.21P = 420

Hence, P = 420/0.21 = Rs. 2000

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7 10091
Q:

In what time will Rs. 3300 becomes Rs. 3399 at 6% per annum interest compounded half-yearly ?

A) Quarter months B) Half year
C) 2 years D) 1 year
 
Answer & Explanation Answer: B) Half year

Explanation:

3300 ----- 3% ↑ (1st time interval, 99) → 3399.

Here, time interval is given as half-yearly i.e. 6 months.

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3 8547
Q:

Find the C.I. on Rs. 15,225 for 9 months at 16% per annum compounded quarterly ?

A) Rs. 1911 B) Rs. 1909
C) Rs. 1901 D) Rs. 1907
 
Answer & Explanation Answer: C) Rs. 1901

Explanation:

P = Rs. 15225, n = 9 months = 3 quarters, R = 16% p.a. per quarter.

 

Amount = 15225x1+41003

 

= (15225 x 26/25 x 26/25 x 26/25) = Rs. 17126.05

 

=> C.I. = 17126 - 15625 = Rs. 1901.05.

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10 8491
Q:

In what time will Rs.1000 become Rs.1331 at 10% per annum compounded annually?

A) 2years B) 3years
C) 4years D) 5years
 
Answer & Explanation Answer: B) 3years

Explanation:

Principal = Rs.1000;

Amount = Rs.1331;

Rate = Rs.10%p.a.

 

Let the time be n years.Then

[1000(1+10/100)Λn;]

= 1331.

= (1331/1000)

= (11/10)³

 

Therefore n = 3 years.

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3 8466
Q:

A five-year promissory note with a face value of $3500, bearing interest at 11%  compounded semiannually, was sold 21 months after its issue date to yield the buyer 10% compounded quarterly.What amount was paid for the note

A) 4336.93 B) 5336
C) 6336 D) 7336
 
Answer & Explanation Answer: A) 4336.93

Explanation:

i=j/m

Maturity value = PV(1 + i)^n

Term = 5 years - 21 months=  3.25 years

Price paid = FV(1+ i )^-n

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7 8345
Q:

An amount of money was lent for 3 years. What will be the difference between the simple  and the compound interest earned on it at the same rate?
I. The rate of interest was 8 p.c.p.a.
II. The total amount of simple interest was Rs. 1200

A) I alone sufficient while II alone not sufficient to answer B) alone sufficient while I alone not sufficient to answer
C) Both I and II are not sufficient to answer D) Both I and II are necessary to answer
 
Answer & Explanation Answer: D) Both I and II are necessary to answer

Explanation:

Given: T = 3 years.
I. gives: R = 8% p.a.
II. gives: S.I. = Rs. 1200.
Thus, P = Rs. 5000, R = 8% p.a. and T = 3 years.
Difference between C.I. and S.I. may be obtained.
So, the correct answer is (D).

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0 8273
Q:

Compound interest on a certain sum of money at 20% per annum for 2 years is Rs.5995. What is the SI on the same money at 8% per annum for 6 years ?

A) Rs. 5989 B) Rs. 6540
C) Rs. 7844 D) Rs. 6789
 
Answer & Explanation Answer: B) Rs. 6540

Explanation:

Given C.I = 5984, R = 20% , T = 2yrs

 C.I = P1+201002-1

 

5984 = 

 

=> P = (5995x25)/11

 

P = Rs. 13625

 

Now S.I = PTR/100

 

SI = (13625 x 8 x 6)/100 = Rs. 6540

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22 8219
Q:

If the simple interest on a sum of money for 2 years at 5% per annum is Rs. 50, what is the compound interest on the same at the same rate and for the same time?

A) Rs.51.25 B) Rs.52
C) Rs.53 D) Rs.54
 
Answer & Explanation Answer: A) Rs.51.25

Explanation:

Sum =Rs.(50 x 100/2x5)

= Rs. 500.

Amount

=[Rs.500x(1+5/100)²]

=Rs(500x21/20x21/20).

=Rs. 551.25

 

C.I

= Rs. (551.25 - 500)

= Rs. 51.25

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