299+ Compound Interest Questions and Answers

Q:

Find the principal if the interest compounded at the rate of 10% per annum for two years is Rs. 420 ?

A) Rs. 2000	B) Rs. 2100
C) Rs. 1900	D) Rs. 2150

Answer & Explanation Answer: A) Rs. 2000

Explanation:

Given,
Compound rate, R = 10% per annum
Time = 2 years
C.I = Rs. 420
Let P be the required principal.
A = (P+C.I)
Amount, A = $P {(1 + (\frac{r}{100}))}^{n}$

(P+C.I) = $P {[1 + (\frac{10}{100})]}^{2}$

(P+420) = P[11/10][11/10]

P-1.21P = -420

0.21P = 420

Hence, P = 420/0.21 = Rs. 2000

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Q:

Find the C.I. on Rs. 15,225 for 9 months at 16% per annum compounded quarterly ?

A) Rs. 1911	B) Rs. 1909
C) Rs. 1901	D) Rs. 1907

Answer & Explanation Answer: C) Rs. 1901

Explanation:

P = Rs. 15225, n = 9 months = 3 quarters, R = 16% p.a. per quarter.

Amount = $15225 x {(1 + \frac{4}{100})}^{3}$

= (15225 x 26/25 x 26/25 x 26/25) = Rs. 17126.05

=> C.I. = 17126 - 15625 = Rs. 1901.05.

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Q:

In what time will Rs.1000 become Rs.1331 at 10% per annum compounded annually?

A) 2years	B) 3years
C) 4years	D) 5years

Answer & Explanation Answer: B) 3years

Explanation:

Principal = Rs.1000;

Amount = Rs.1331;

Rate = Rs.10%p.a.

Let the time be n years.Then

[1000(1+10/100)Λn;]

= 1331.

= (1331/1000)

= (11/10)³

Therefore n = 3 years.

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Q:

A five-year promissory note with a face value of $3500, bearing interest at 11% compounded semiannually, was sold 21 months after its issue date to yield the buyer 10% compounded quarterly.What amount was paid for the note

A) 4336.93	B) 5336
C) 6336	D) 7336

Answer & Explanation Answer: A) 4336.93

Explanation:

i=j/m

Maturity value = PV(1 + i)^n

Term = 5 years - 21 months= 3.25 years

Price paid = FV(1+ i )^-n

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Q:

What would be the least number of years in which the simple interest on Rs.2600 at % will be an exact number of rupees ?

A) 2	B) 3
C) 4	D) 5

Answer & Explanation Answer: B) 3

Explanation:

$S . I = R s . [2600 * \frac{20}{3} * \frac{1}{100} * t]$

$S . I = R s . [\frac{520}{3} * t]$

t=3

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

A) 2years	B) 3years
C) 4years	D) 5years

Answer & Explanation Answer: A) 2years

Explanation:

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

Let the time be n years. Then,

$30000 {[1 + \frac{7}{100}]}^{n} = 34347$

$\Leftrightarrow$ ${(\frac{107}{100})}^{n} = \frac{34347}{30000} = \frac{11449}{10000} = {(\frac{107}{100})}^{2}$

n= 2years.

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Q:

An amount of money was lent for 3 years. What will be the difference between the simple and the compound interest earned on it at the same rate?
I. The rate of interest was 8 p.c.p.a.
II. The total amount of simple interest was Rs. 1200

A) I alone sufficient while II alone not sufficient to answer	B) alone sufficient while I alone not sufficient to answer
C) Both I and II are not sufficient to answer	D) Both I and II are necessary to answer

Answer & Explanation Answer: D) Both I and II are necessary to answer

Explanation:

Given: T = 3 years.
I. gives: R = 8% p.a.
II. gives: S.I. = Rs. 1200.
Thus, P = Rs. 5000, R = 8% p.a. and T = 3 years.
Difference between C.I. and S.I. may be obtained.
So, the correct answer is (D).

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