299+ Compound Interest Questions and Answers

Q:

What is the difference between the compound interests on Rs. 5000 for 11⁄2 years at 4% per annum compounded yearly and half-yearly?

A) Rs. 1.80	B) Rs. 2.04
C) Rs. 3.18	D) Rs. 4.15

Answer & Explanation Answer: B) Rs. 2.04

Explanation:

Compound Interest for 1 ¹⁄₂ years when interest is compounded yearly = Rs.(5304 - 5000)

Amount after 1¹⁄₂ years when interest is compounded half-yearly

Compound Interest for 1 ¹⁄₂ years when interest is compounded half-yearly = Rs.(5306.04 - 5000)

Difference in the compound interests = (5306.04 - 5000) - (5304 - 5000)= 5306.04 - 5304 = Rs. 2.04

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17 3857

Q:

Two payments of $10,000 each must be made one year and four years from now. If money can earn 9% compounded monthly, what single payment two years from now would be equivalent to the two scheduled payments?

A) 17296	B) 13296
C) 19296	D) 15296

Answer & Explanation Answer: C) 19296

Explanation:

i=j/m

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1 3813

Q:

Simple interest on a certain sum at 7% per annum for 4 years is Rs. 2415. What will be the compound interest on the same principal at 4% per annum in two years?

A) Rs. 704	B) Rs. 854
C) Rs. 893	D) Rs. 914

Answer & Explanation Answer: A) Rs. 704

Explanation:

We know that,

$S . I . = \frac{PTR}{100} \Rightarrow P = \frac{S . I x 100}{T x R} And also, C . I = P [{(1 + \frac{R}{100})}^{n} - 1]$

From given data, P = Rs. 8625

Now, C.I = $8625 [{(1 + \frac{4}{100})}^{2} - 1] = 8625 [{(\frac{26}{25})}^{2} - 1] = 8625 [\frac{676}{625} - 1] = 8625 x \frac{51}{625} C . I = Rs . 703.80$

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11 3810

Q:

The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in years) is:

A) 3years	B) 2years
C) 4years	D) 6years

Answer & Explanation Answer: B) 2years

Explanation:

Amount = Rs. (30000 + 4347) = Rs. 34347.

Let the time be n years.

Then, 30000*(1+7/100)^n=34347

n= 2 years

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0 3750

Q:

A loan is made for $4800 with an APR of 12% and payments made monthly for 24 months. What is the payment amount? What is the finance charge?

A) 622.80	B) 522.80
C) 322.80	D) 632.80

Answer & Explanation Answer: A) 622.80

Explanation:

${\color{Blue} A=R\left [(1+i)^{n-1} \right ]/i ( 1+i )^{n}}$

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0 3660

Q:

If the rate of inflation for the next 20 years is 2.5% per year, what annual income will be needed 20 years from now to have the same purchasing power as a $30,000 annual income today?

A) 39158	B) 49158
C) 59158	D) 69158

Answer & Explanation Answer: B) 49158

Explanation:

i=j/m

FV = PV(1+ i)^n

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2 3646

Q:

For S = $21,000, payments (R) of $1500 at the end of each 6-month periodi= 10% compounded semi-annually. Find the minimum number of payments to accumulate 21,000.

A) 10	B) 11
C) 12	D) 13

Answer & Explanation Answer: B) 11

Explanation:

S=R[(1+i)^n-1)/i]

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0 3638

Q:

Kashundra Jones plans to make a lump sum deposit so that she can withdraw $3,000 at the end of each quarter for 10 years. Find the lump sum if the money earns 10% per year compounded quarterly

A) 75263.64	B) 76345
C) 76389	D) 56897

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