Compound Interest

Question: What will be compounded amount?
[A].
I alone sufficient while II alone not sufficient to answer
[B].

II alone sufficient while I alone not sufficient to answer
[C].

Either I or II alone sufficient to answer
[D].

Both I and II are not sufficient to answer 

Answer: Option C

Explanation:

I. Amount = Rs.		200 x		1 +	6		16
					100

II. Amount = Rs.		200 x		1 +	6		16
					100

Thus, I as well as II gives the answer.

Correct answer is (C).

Question:
The least number of complete years in which a sum of money put out at 20% compound interest will be more than doubled is:

[A].

3

[B].

4

[C].

5

[D].

6

Answer: Option B

Explanation:

P		1 +	20		n	> 2P			6		n	> 2.
			100						5

Now,		6	x	6	x	6	x	6		> 2.
		5		5		5		5

So, n = 4 years.

Question:
The effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half-yearly is:

[A].

6.06%

[B].

6.07%

[C].

6.08%

[D].

6.09%

Answer: Option D

Explanation:

Amount of Rs. 100 for 1 year when compounded half-yearly		= Rs.		100 x		1 +	3		2		= Rs. 106.09
							100

Effective rate = (106.09 – 100)% = 6.09%

Question:
The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 4% per annum is Re. 1. The sum (in Rs.) is:

[A].

625

[B].

630

[C].

640

[D].

650

Answer: Option A

Explanation:

Let the sum be Rs. x. Then,

C.I. =		x		1 +	4		2	– x		=		676	x	– x		=	51	x.
					100							625					625

S.I. =		x x 4 x 2		=	2x	.
		100			25

	51x	–	2x	= 1
	625		25

x = 625.

Question:
There is 60% increase in an amount in 6 years at simple interest. What will be the compound interest of Rs. 12,000 after 3 years at the same rate?

[A].

Rs. 2160

[B].

Rs. 3120

[C].

Rs. 3972

[D].

Rs. 6240

Answer: Option C

Explanation:

Let P = Rs. 100. Then, S.I. Rs. 60 and T = 6 years.

R =		100 x 60		= 10% p.a.
		100 x 6

Now, P = Rs. 12000. T = 3 years and R = 10% p.a.

C.I.	= Rs. 12000 x 1 + 10 3 – 1 100
	= Rs. 12000 x 331 1000
	= 3972.

Question:
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. 2000

Answer: Option C

Explanation:

C.I.	= Rs. 4000 x 1 + 10 2 – 4000 100
	= Rs. 4000 x 11 x 11 – 4000 10 10
	= Rs. 840.

Sum = Rs.		420 x 100		= Rs. 1750.
		3 x 8

Question:
The compound interest on a certain sum for 2 years at 10% per annum is Rs. 525. The simple interest on the same sum for double the time at half the rate percent per annum is:

[A].

Rs. 400

[B].

Rs. 500

[C].

Rs. 600

[D].

Rs. 800

Answer: Option B

Explanation:

Let the sum be Rs. P.

Then,		P		1 +	10		2	– P		= 525
					100

	P			11		2	– 1		= 525
				10

P =		525 x 100		= 2500.
		21

Sum = Rs . 2500.

So, S.I. = Rs.		2500 x 5 x 4		= Rs. 500
		100

Question:
At what rate of compound interest per annum will a sum of Rs. 1200 become Rs. 1348.32 in 2 years?

[A].

6%

[B].

6.5%

[C].

7%

[D].

7.5%

Answer: Option A

Explanation:

Let the rate be R% p.a.

Then, 1200 x		1 +	R		2	= 1348.32
			100

		1 +	R		2	=	134832	=	11236
			100				120000		10000

		1 +	R		2	=		106		2
			100					100

1 +	R	=	106
	100		100

R = 6%

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

[A].

2

[B].

2	1
	2

[C].

3

[D].

4

Answer: Option A

Explanation:

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

Let the time be n years.

Then, 30000		1 +	7		n	= 34347
			100

		107		n	=	34347	=	11449	=		107		2
		100				30000		10000			100

n = 2 years.

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

[A].

Rs. 2.50

[B].

Rs. 3

[C].

Rs. 3.75

[D].

Rs. 4

Answer: Option B

Explanation:

S.I. = Rs		1200 x 10 x 1		= Rs. 120.
		100

C.I. = Rs.		1200 x		1 +	5		2	– 1200		= Rs. 123.
					100

Difference = Rs. (123 – 120) = Rs. 3.