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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 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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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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Q:

The compound interest earned by Sunil on a certain amount at the end of two years at the rate of 8% p.a. was Rs.2828.80. Find the total amount that Sunil got back at the end of two years in the form of principal plus interest earned  ?

A) Rs. 11828.80 B) Rs. 19828.80
C) Rs. 9828.80 D) Rs. 19328.80
 
Answer & Explanation Answer: B) Rs. 19828.80

Explanation:

Let the sum be Rs. P
P{ 1+81002- 1 } = 2828.80

 

It is in the form of  a2-b2 = a+ba-b

 

P(8/100)(2 + 8/100) = 2828.80

 

P = 2828.80 / (0.08)(2.08)

 

= 1360/0.08 = 17000

 

Principal + Interest = Rs. 19828.80

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Q:

A chartered bank offers a five-year Escalator Guaranteed Investment Certificate.In successive years it pays annual interest rates of 4%, 4.5%, 5%, 5.5%, and 6%, respectively, compounded at the end of each year. The bank also offers regular five-year GICs paying a fixed rate of 5% compounded annually. Calculate and compare the maturity values of $1000 invested in each type of GIC. (Note that 5% is the average of the five successive one-year rates paid on the Escalator GIC.)

A) 1276.28 B) 1234
C) 1278 D) 1256
 
Answer & Explanation Answer: A) 1276.28

Explanation:

FV = $1000(1.04)(1.045)(1.05)(1.055)(1.06) = $1276.14

 the maturity value of the regular GIC is

 

 FV = $ 1000 x 1.055=  $1276.28

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Q:

What is the SI on Rs.2500/- at the rate of 12% per annum for 8 years?

A) 2200 B) 2300
C) 2400 D) 2500
 
Answer & Explanation Answer: C) 2400

Explanation:

S.I=PNR/100

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Q:

The difference between the compound interest and simple interest on an amount of Rs.15000 for two years is Rs.96. what is the rate of interest per annum

A) 8 B) 10
C) 12 D) 13
 
Answer & Explanation Answer: A) 8

Explanation:

[15000 *(1+r/100)^2-15000]-(15000*r*2)/100=96

r=8

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Q:

At 3% annual interest compounded monthly, how long will it take to double your money?

A) 20.1 B) 21.1
C) 22.1 D) 23.1
 
Answer & Explanation Answer: D) 23.1

Explanation:

At first glance it might seem that this problem cannot be solved because we do not have enough
information. It can be solved as long as you double whatever amount you start with. If we start with
$100, then P = $100 and FV = $200.

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

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Q:

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

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

Explanation:

S.I. = Rs.(1200*10*1)/100=rs.120

C.I. =rs[1200*(1+5/100)2-1200]=rs.123

Difference = Rs.(123-120) =Rs.3

 

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