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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:

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 2876
Q:

Calculate the periodic interest rate corresponding to 9.5% compounded monthly

A) 0.7916 B) 0.8916
C) 0.9916 D) 0.6916
 
Answer & Explanation Answer: A) 0.7916

Explanation:

i=j/m

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0 2860
Q:

Calculate the effective interest rate of a 10% annual rate compounded continuously.

A) 9.52% B) 10.52%
C) 11.52% D) 12.52%
 
Answer & Explanation Answer: B) 10.52%

Explanation:

E=e^i-1

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0 2840
Q:

Other things being equal, would an investor prefer an interest rate of 10.5% compounded monthly or 11% compounded annually for a two-year investment?

A) 1232 B) 1243
C) 1254 D) 1262
 
Answer & Explanation Answer: A) 1232

Explanation:

i=j/m

 

FV=  PV(1+  i)^n 

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0 2838
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 2832
Q:

For a nominal interest rate of 8.4%, what is the compounding frequency if the periodic interest rate is:0.7

A) 9 B) 10
C) 11 D) 12
 
Answer & Explanation Answer: D) 12

Explanation:

i=j/m

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0 2821
Q:

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

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

Explanation:

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

(1+7/100)^n=34347

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0 2792
Q:

For a nominal interest rate of 8.4%, what is the compounding frequency if the periodic interest rate is:2.1

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

Explanation:

i=j/m

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