Compound Interest Quiz Set 001

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Question 1

The difference between compound interest(annual compounding) and simple interest for a period of 2 years is Rs. 8. What is the rate p.a. if principal is Rs. 20000?

 A

2%.

 B

4%.

 C

3%.

 D

5%.

Soln.
Ans: a

If d is the difference, r is the rate and P is the principal, then the shortcut formula for the difference between compound and simple interest over a period of 2 years is d = P × $(r/100)^2$. So rate = 100 × $√{d/P}$ = 100 × $√{8/20000}$ = 2%.


Question 2

An amount P is invested for 1 year @2% p.a. The simple interest is Rs. 3000. What would be the compound interest on the same amount, at the same rate and for the same time, compounded annually?

 A

Rs. 3000.

 B

Rs. 3100.

 C

Rs. 2900.

 D

Rs. 3200.

Soln.
Ans: a

The compound interest and simple interest are exactly same for a period of 1 year if P and r are always same.


Question 3

What is the difference between the simple interest and compound interest at the rate of 4% for 1 year? The compounding is half-yearly, and the principal is Rs. 20000.

 A

Rs. 8.

 B

Rs. 108.

 C

Rs. 58.

 D

Rs. 208.

Soln.
Ans: a

The simple interest SI = (P × r)/100 = (20000 × 4)/100 = Rs. 800. Compound interest will have half interest rate and n = 2. By shortcut formula, we have CI = ${P × R × (R + 200)}/10000$ = ${20000 × 2 × (2 + 200)}/10000$ = Rs. 808. The difference = Rs. 8.


Question 4

What is the difference between the simple interest and compound interest at the rate of 4% for 1 year? The compounding is half-yearly, and the principal is Rs. 50000.

 A

Rs. 20.

 B

Rs. 120.

 C

Rs. 70.

 D

Rs. 220.

Soln.
Ans: a

The simple interest SI = (P × r)/100 = (50000 × 4)/100 = Rs. 2000. Compound interest will have half interest rate and n = 2. By shortcut formula, we have CI = ${P × R × (R + 200)}/10000$ = ${50000 × 2 × (2 + 200)}/10000$ = Rs. 2020. The difference = Rs. 20.


Question 5

A bank offers an interest rate of 9% compounded annually. Initially I deposit Rs. 50000 in the bank under this scheme. After 1 year I again deposit Rs 50000. What is the total amount that I will get after 2 years?

 A

Rs. 113905.

 B

Rs. 114005.

 C

Rs. 113805.

 D

Rs. 114105.

Soln.
Ans: a

Let P, A, r and n have their usual meanings. For the first deposit n = 2, and for the second deposit n = 1. So total amount is P × $((1 + r/100)^2 + (1 + r/100))$ = $P/10000$ × $((100 + r)^2 + 100(100 + r))$ = $P/10000 × (100 + r)$ × $(100 + r + 100)$ which equals ${P × (100 + r) × (200 + r)}/10000.$ Putting r = 9 and P = 50000 and cancelling 10000, we get 5 × 109 × 209 = Rs. 113905.


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This Blog Post/Article "Compound Interest Quiz Set 001" by Parveen (Hoven) is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Updated on 2017-04-07.

Posted by Parveen(Hoven),
Aptitude Trainer


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