## 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 R
_{1}%, R_{2}% …………. R_{n}% 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)