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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:

If you deposit $4000 into an account paying 6% annual interest compounded quarterly, how much money will be in the account after 5 years ?

A) 3387.42 B) 4387.42
C) 5387.42 D) 6387.42
 
Answer & Explanation Answer: C) 5387.42

Explanation:

The mathematical formula for calculating compound interest depends on several factors. These factors include the amount of money deposited called the principal, the annual interest rate (in decimal form), the number of times the money is compounded per year, and the number of years the money is left in the bank.

 FV=p1+rnnt

 

FV = Future value of the Deposit

 

p = Principal or Amount of Money deposited

 

r = Annual Interest Rate (in decimal form )

 

n = No of times compounded per year

 

t = time in years

FV=40001+0.0644(5)= 5387.42

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21 20693
Q:

The difference between simple interest and compound interest on Rs. 1200 for one year at 10% per annum reckoned half yearly is

A) Rs.2.50 B) Rs.3
C) Rs.4 D) Rs.4.50
 
Answer & Explanation Answer: B) Rs.3

Explanation:

S.I

= Rs.(1200x10x1/100)

= Rs.120.

 

C.I

= Rs[(1200x1+5/100)² -1200]

= Rs.123. 

 

Difference

= Rs.[123-120]

= Rs. 3.

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28 19884
Q:

Determine the nominal rate of interest if:

The periodic rate is 0.83% per month

A) 7% B) 8%
C) 9% D) 10%
 
Answer & Explanation Answer: D) 10%

Explanation:

j=mi

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2 17067
Q:

Rs.100 doubled in 5 years when compounded annually. How many more years will it take to get another Rs.200 compound interest

A) 3years B) 5years
C) 6years D) 7years
 
Answer & Explanation Answer: B) 5years

Explanation:

Rs.100 invested in compound interest becomes Rs.200 in 5 years.

The amount will double again in another 5 years.

i.e., the amount will become Rs.400 in another 5 years.

So, to earn another Rs.200 interest, it will take another 5 years.

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13 16829
Q:

A sum of money invested at compound interest amounts to Rs. 800 in 3 years and to Rs. 840 in 4 years. The rate of interest per annum is

A) 6% B) 4%
C) 5% D) 7%
 
Answer & Explanation Answer: C) 5%

Explanation:

S.I. on Rs.800 for 1 year

=Rs[840 - 800]

= Rs.40

 

Rate

=(100x40/800x1)%

= 5%

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14 16728
Q:

Albert invested an amount of Rs. 8000 in a fixed deposit scheme for 2 years at compound interest rate 5 p.c.p.a. How much amount will Albert get on maturity of the fixed deposit

A) Rs.8820 B) Rs.8620
C) Rs.8520 D) Rs.8320
 
Answer & Explanation Answer: A) Rs.8820

Explanation:

 

Amount = Rs.8000*1+51002=Rs.8820

 

 

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12 14905
Q:

Simple interest on a certain sum of money for 3 years at 8% per annum is half the compound interest on Rs. 4000 for 2 years at 10% per annum. The sum placed on simple interest is:

A) Rs.1550 B) Rs.1650
C) Rs,1750 D) Rs.1850
 
Answer & Explanation Answer: C) Rs,1750

Explanation:

C.I.= Rs.[4000*(1+10/100)^2-4000]

 =Rs.840

sum=Rs.(420 * 100)/3*8=Rs.1750

 

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23 13993
Q:

If you deposit $6500 into an account paying 8% annual interest compounded monthly, how
much money will be in the account after 7 years?

A) 11358.24 B) 12334
C) 15789 D) 12386
 
Answer & Explanation Answer: A) 11358.24

Explanation:

FV=P(1+r/n)^nt

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