INTRODUCTION

This ebook gives different types of questions that

can be asked from the area of simple interest and
compound interest which can be expected in
competitive exams.
CONTENTS
SET I
SET II
SET III
SET I
Please solve the following Compound Interest
Questions:
Q.1.Find the minimum number of complete years required
so that the sum of money put out at 20 % compound
interest will be more than double.
a) 1 Year
b) 2 Year
c) 3 Year
d) 4 Year
e) 5 Year
Answer & Explanation
Sol : Option D
Explanation: Rate of interest = 20%. So P (1 + 20/100)t >
2P
→(6/5)t > 2 = (1.2)t > 2
→Putting the values of t = 1, 2, 3, 4, only t = 4 years is
satisfied.
→t = 4 years.
Q.2. A sum of money at compound interest amounts to four
times of itself in 2 years. In how many years will it be 16
times of itself?
a) 18 Year
b) 27 Year
c) 9 Year
d) 6 Year
e) 4 Year
Answer & Explanation
Sol : Option E
Explanation: Rs. 1 becomes Rs. 4 in 2 years. i.e. 1 → 4 (2
years)
So, 4 → 16 in another 2 years
Hence, we can say that Rs. 1 becomes Rs. 16 in 2 + 2 = 4
years.
Hence, the answer is option E
Q.3. A sum of money at compound interest amounts to
eight times of itself in 3 years. In how many years will it be
512 times of itself?
a) 28 Year
b) 24 Year
c) 9 Year
d) 16 Year
e) 14 Year
Answer & Explanation
Sol : Option C
Explanation: Rs. 1 becomes Rs. 8 in 3 years. i.e. 1 → 8 in 3
years.
So, 8 → 64 in another 3 years.
Also, 64 → 512 in another 3 years.
Hence, we can say that Rs. 1 becomes Rs. 512 in 3 + 3 + 3
= 9 years.
Hence, the answer is option C
Q.4.In what time will a man receive Rs. 51 as compound
interest on Rs. 625 at 4% p.a. compounded annually?
a) 4 1/2 Year
b) 2 1/2 Year
c) 2 Year
d) 3 Year
e) 5 Year
Answer & Explanation
Sol : Option C
Explanation: CI = Rs.51 therefore, A = 625 +51 = 676.
→ 676 = 625(1 + 4/100)t
→ t = 2 years.
Q.5.In what time will a man receive Rs. 1449 as compound
interest on Rs. 10000 at 7% p.a. compounded annually?
a) 4 Year
b) 2 1/2 Year
c) 2 Year
d) 5 Year
e) 3 Year
Answer & Explanation
Sol : Option C
Explanation: CI = Rs.1449 therefore, A =10000 + 1449 =
Rs. 11449
→ 11449 = 10000(1 + 7/100)t
→ t = 2 years.
Q.6.In how many years will Rs. 25 lent at compound
interest at 6 % p.a. amount to Rs. 28.09?
a) 1 1/2 Year
b) 2 Year
c) 2 1/2 Year
d) 3 Year
e) 4 Year
Answer & Explanation
Sol : Option B
Explanation: 28.09 = 25 (1 + 6/100)t
→ 2809/2500 = (53/50)t
→ t = 2 years.
Q7.I invested a sum of money at compound interest. It
amounted to Rs. 4840 in 2 years and to Rs. 5324 in 3 years.
Find the rate of interest.
a) 8 %
b) 12 %
c) 10 %
d) 15 %
e) 20 %
Answer & Explanation
Sol : Option C
Explanation: Rate of interest = (5324-4840)4840 X 100 =
10%
Q8.I invested a sum of money at compound interest. It
amounted to Rs. 6741 in 3 years and Rs. 6420 in 4 years.
Find the rate of interest.
a) 11 %
b) 18 %
c) 12 %
d) 5 %
e) 10 %
Answer & Explanation
Sol : Option D
Explanation: Rate of interest = (6741-6420)/6420 X 100 =
5%
Q9.A certain sum of money invested @ 40 % p.a.
compounded half-yearly amounts to Rs. 5760 in 1 year.
What is the sum (in Rs.)?
A. B. C. D. E.
a) 2100
b) 4000
c) 1900
d) 2000
e) 2200
Answer & Explanation
Sol : Option B
Explanation: Half yearly, therefore, R= 40 /2 % = 20% and
T = 1 × 2 = 2 years
Applying formula, 5760=P (1 + 20/100)2
P= 5760 X 25/36 = Rs. 4000
Q10.A sum of money is invested at compound interest
compounded annually. The interests in two successive years
were Rs. 150 and Rs. 168. Then the rate percent was
a) 1.5 %
b) 3 %
c) 6 %
d) 12 %
e) None Of The Above
Answer & Explanation
Sol : Option B
Explanation: R= (168-150)150 =12%
SET II
Before going to the simple interest and compound
interest problems, you should revise the simple and
compound interest formulas. After revising the
formulas you will understand the following examples.
Example 1:If the difference between Simple Interest and
Compound Interest on a certain sum of money in 2 years at
20 % p.a. is Rs. 800, then find the sum.
Solution:
Sol:If difference between Simple Interest & Compound
Interest for 2 years is Rs. x, then Principal = x
(100/r)2 P = 800 X 10000/20*20 → P = 20000. Hence the
sum is Rs. 20000.
Example 2:The compound interest on a certain sum of
money for 2 years is Rs. 52 and the simple interest for the
same time at the same rate is Rs. 50. Find the rate %.
Solution:
Sol:SI for 2 years = 50, CI for 2 years = 52. therefore As, SI
and CI are same for the first year,
therefore, SI and CI for 1st year = Rs. 25. So CI for 2nd year =
52 – 25 = 27
i.e. a difference of Rs. 2 on 1st year’s interest of Rs. 25.
Hence rate of interest = 100 X 2/25 = 8%.
Must Read Compound Interest Articles
Example 3:The difference between Compound Interest and
Simple Interest on a certain sum of money at 10 % per
annum for 3 years is Rs. 930. Find the principal if it is known
that the interest is compounded annually.
Solution:
Sol: The Simple Interest after three years @ 10% is 30%.
Cumulative rate of Interest is 33.1%.The Compound
Interest after 3 years @ 10% will be 1.1 × 1.1 × 1.1 = 1.331

Here, the difference after 3 years is 3.1% and in the

question it is given to be Rs. 930.
Thus, the Principal is 930 × 100/3.1 = Rs. 30000.
Example 4:The population of a town has a constant growth
of 4% p.a. If its present population is 62,500, what will be its
population after two years?
Solution:
Sol:: Population after 2 years = P (1 + 4/100) 2 = 62500 X
(104/100)2
= 62500 × 26/25 X 26/25 = 100 × 26 ×26 = 67600.
Hence, the population after two years will be 67,600.
Example 5:The cost of a new washing machine is Rs.
12000. Its value depreciates every year at the rate of 10%.
What will be its value after three years?
Solution:
Sol:The cost of washing machine = Rs. 12000
Rate of depreciation = 10%, Time = 3 years
Due to depreciation, the price of the washing machine is
reduced.
Therefore, Price of washing machine after three years
= Rs. 12000 × (1 - 10/100)3 = Rs. 12000 × (90/100)3 = Rs.
12000 × 9/10 x 9/10 x 9/10 = Rs. 8748.
SET III
Go through the given solved examples based on
compound interest to understand the concept better.
Example 1:Calculate the Amount and Compound Interest on Rs.
2000 for 2 years at 10% per year.
Sol:We need to calculate the value of Amount using this formula:
A = P (1 + R/100)T . Putting the values in this formula, given P =
Rs. 2000, R = 10% and T = 2 years
We get the value of A as 2000(1 + 10/100)2. So A = 2000 ×
(11/10)2 = (2000 X 121)/100 = 2420
So, the Amount = Rs. 2420. Hence, Compound Interest = Rs.
2420 – Rs. 2000 = Rs. 420.
Example 2:Find the compound interest on Rs. 12,800 for 2 years
at per annum.
Sol:Here, P = Rs. 12,800, R = 25/2% p.a., T = 2 years
Therefore, A = RS.P(1 + R/100)n = RS.12800[1 + 25/(2 X 100)]2
= RS.12800 (1 + 25/200)2 = RS.12800 (1 + 1/8)2 = RS.12800 [(8
+ 1)/8]2
Hence, the Amount = Rs. 16200
Now, Compound interest = A – P = Rs. 16200 – Rs. 12800 = Rs.
3400
Example 3:At what rate percent per annum will a sum of Rs.
10,000 amount to Rs. 14,641 in 4 years compounded annually?
Sol: Let the required rate be R% per annum
A = 14641, P = Rs. 10000
We know that A = P (1 + R/100)n 14641 = 10000 (1 + R/100)4
Or 14641/10000 = (1 + R/100)4 or (11/10)4 = (1 + R/100)4
Or 11/10 = 1 + R/100 or 11/10 -1 = R/100
Or (11 -10)/10 = R/100 or 1/10 = R/100
Or 100/10 = R or 10 = R or R = 10% p.a.
Example 4:Calculate the compound interest on Rs. 12000 for 1
years at 10% per annum when compounded half-yearly.
Sol:Here, Principal P = Rs. 12000, R = 20% per annum and n = 2
years.
therefore, Amount after 2 years = P (1 + R/200)2n
= RS.12000 X (1 + 10/200)2x1
= RS.12000 X (1 + 1/20)2
= RS.12000 X (21/20)2
= RS.12000 X 21/20 X 21/20
= RS.12000 X 441/400 = RS.13230
therefore, Compound interest = Rs. 13230 – Rs. 12000 = Rs.
1230
Must Read Compound Interest Articles
Example 5:Shyam deposited in a bank Rs. 7500 for 6 months at
the rate of 8% p.a. interest compounded quarterly. Find the
amount he received after 6 months.
Sol: Here, P = Rs. 7500, R = 8% per annum and n = 6 months =
6/12 = ½ year.
therefore, Amount after 6 months = P(1 + R/400) 4n
= RS.7500 X (1 + 8/400)4x1/2
= RS.7500 X (1 + 1/50)2
= RS.7500 X (51/50)2
= RS.7803
Example 6: In what time will Rs. 2,560,000 amount to Rs.
2,825,761 at 5% per annum, interest being compounded half-
yearly?
Sol: Here, Principal P = Rs. 2,560,000, Amount A = Rs.
2,825,761, rate R = 5% per annum
Since, the interest is compounded half-yearly
therefore, A = P(1 + R/200)2n , where n is the no. of years
→2,825,761=2,560,000(1 + 5/200)2n
→2,825,761/2,560,000=(41/40)2n
→(41/40)4 =(41/40)2n
→2n=4
→n=4/2 years = 2 years
Example 7: A sum of Rs. 220 is to be repaid in two equal
installments. If the rate of interest be 20 % compounded
annually, then what is the value of each installment?
Sol: Total sum that has to be paid = Rs.220. Rate of interest =
20%. For compound interest the principal value of all the
installments are calculated, added
and then equated with the principal value of loan amount.
Let the value of each installment = x therefore, x/(1 +
20/100)s1 + x/(1 + 20/100)2 = 220 → x = 144.