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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:

What is the interest rate per annum, if a sum of money invested at compound interest amount to Rs. 2400 in 3 years and in 4 years to Rs. 2,520?

A) 3.5% B) 4%
C) 5% D) 6.5%
 
Answer & Explanation Answer: C) 5%

Explanation:

Let 'R%' be the rate of interest

From the given data,

25202400 = 1 + R10041 + R1003⇒1 + R100 = 6360⇒R = 5

 

Hence, the rate of interest R = 5% per annum.

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19 3600
Q:

Find the time to double your investment at 6%

A) 10years B) 11years
C) 12years D) 13years
 
Answer & Explanation Answer: C) 12years

Explanation:

M=p(1+i)^n

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1 3556
Q:

The difference between simple interest and compound interest of a certain sum of money at 20% per annum for 2 years is Rs. 56. Then the sum is :

A) Rs. 3680 B) Rs. 2650
C) Rs. 1400 D) Rs. 1170
 
Answer & Explanation Answer: C) Rs. 1400

Explanation:

We know thatThe Difference between Compound Interest and Simple Interest for n years at R rate of interest is given by C.In - S.In = PR100n

Here n = 2 years, R = 20%, C.I - S.I = 56

56 = P201002=> P = 56 x 52=> P = 56 x 25=> P = Rs. 1400

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28 3541
Q:

The periodic interest rate corresponding to: 9.75% compounded semiannually

A) 4.875 B) 3.785
C) 4.865 D) 4.975
 
Answer & Explanation Answer: A) 4.875

Explanation:

i=j/m

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2 3539
Q:

Determine the nominal rate of interest if:
The periodic rate is 1.75% per quarter.

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

Explanation:

j=mi

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3 3530
Q:

What lump sum deposited today would allow payments of $2000/year for 7 years at 5% compounded annually?

A) 11572.71 B) 11876
C) 189756 D) 11576
 
Answer & Explanation Answer: A) 11572.71

Explanation:

 

 

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

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0 3381
Q:

For a nominal interest rate of 8.4%, what is the compounding frequency if the periodic interest rate is 8.4

A) 1 B) 2
C) 3 D) 4
 
Answer & Explanation Answer: A) 1

Explanation:

m=j/i

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0 3350
Q:

Sharon Stone deposits $500 at the beginning of each 3 months in an account earning 10% compounded quarterly. Determine how much money she has after 25 years

A) 22681.19 B) 23456
C) 44577 D) 25685
 
Answer & Explanation Answer: A) 22681.19

Explanation:

 

 

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

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0 3349