Simple and Compound Interest – Practice Questions, Shortcuts, Important Formulas
Simple and Compound Interest
- Principal: The money borrowed or lent out for a certain period is called the principal or the sum.
- Interest: Extra money paid for using other’s money is called interest.
- Simple Interest (SI): If the interest on a sum borrowed for a certain period is reckoned uniformly, then it is called simple interest.
- Compound Interest: Interest added to the principal of a loan or deposit, so that the added interest also earns interest. This process is called compounding.
Important Formulas & Equations
If P = Principal, A = Amount, R = Rate percent per year, T = T years, S.I = Simple interest, C.I = Compound interest, Then,
Simple Interest
- S.I = (P × R × T)/100
- A = P + S.I
Compound Interest
- When interest is compounded yearly,
- When interest is compounded half-yearly,
- When interest is compounded quarterly,
- When time is in a fraction of a year, say 2⅕
- If the rate of interest in 1st year, 2nd year …………..… nth year is R1%, R2% …………. Rn% respectively, then,
Simple Interest and Compound Interest Aptitude Questions
1.Mr. Thomas spent Rs. 13,900 divided into two separate schemes A and B at a simple rate of interest of 14 percent p.a. And p.a. 11 percent Accordingly. If Rs. 3508 is the sum of simple interest received in 2 years, what was the amount invested in Scheme B?
- A. Rs. 6400
- B. Rs. 6500
- C. Rs. 7200
- D. Rs. 7500
Answer: Option A (Rs. 6400)
2. How long will it take to yield Rs. 81 as interest at 4.5 percent per annum of simple interest for an amount of Rs. 450?
- A. 3.5 years
- B. 4 years
- C. 4.5 years
- D. 5 years
Answer: Option B (4 years)
3. A sum of Rs 12,500 at the rate of simple interest amounts to Rs 15,500 in 4 years. What is the interest rate?
- A. 3%
- B. 4%
- C. 5%
- D. 6%
Answer: Option D (6%)
4. A man took a loan at a rate of 12 percent p.a. from a bank. Simple interest. He was only expected to pay Rs. 5400 interest for the duration after three years. The principal sum which he borrowed was
- A. Rs. 2000
- B. Rs. 10,000
- C. Rs. 15,000
- D. Rs. 20,000
Answer: Option C (Rs. 15,000)
5. What is the ratio of simple interest earned for six years by a certain amount at the same interest rate, and that for nine years?
- A. 1 : 3
- B. 1: 4
- C. 2 : 3
- D. Data inadequate
Answer: Option C (2:3)
6. After seven years, a certain amount earns simple interest on Rs. 1750. Had the interest been 2 percent higher, how much more interest would it have earned?
- A. Rs. 35
- B. Rs. 245
- C. Rs. 350
- D. Cannot be determined
Answer: Option D (Cannot be determined)
7. Find out the C.I on Rs.5000 at 4% p.a. Compound half-yearly for 1 1/2 years.
- A. Rs.420.20
- B. Rs.319.06
- C. Rs.306.04
- D. Rs.294.75
Answer: Option C (Rs.306.04)
8. In a certain time, Rs.8000 becomes Rs.9261 at a rate of 5 percent per annum of C.I. Finding time?
- A. 4 years
- B. 6 years
- C. 2 years
- D. 3 years
Answer: Option D (3 years)
9. The difference between simple and compound returns, compounded annually at 4 percent per annum on a certain amount of money for two years, is Re. 1. The number (in Rs.) will be:
- A. 625
- B. 630
- C. 640
- D. 650
Answer: Option A (625)
10. A basic value, there is a rise of 60 percent in a sum in 6 years. What is Rs.12,000 compound interest going to be at the same rate after three years?
- A. Rs. 2160
- B. Rs. 3120
- C. Rs. 3972
- D. Rs. 6240
Answer: Option C (Rs. 3972)
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