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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?

### 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.

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.