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Simple and Compound Interest

The document discusses the concepts of simple interest and compound interest. Simple interest is calculated on the principal only, while compound interest is calculated on the principal and previously earned interest. The key formulas provided are: Simple Interest = Principal x Rate x Time Compound Interest calculated annually = Principal x (1 + Rate/100)^Time Compound Interest rate can be calculated quarterly, half-yearly, or annually. Several examples of simple interest and compound interest word problems are included for practice.

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VINAY B.S
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369 views29 pages

Simple and Compound Interest

The document discusses the concepts of simple interest and compound interest. Simple interest is calculated on the principal only, while compound interest is calculated on the principal and previously earned interest. The key formulas provided are: Simple Interest = Principal x Rate x Time Compound Interest calculated annually = Principal x (1 + Rate/100)^Time Compound Interest rate can be calculated quarterly, half-yearly, or annually. Several examples of simple interest and compound interest word problems are included for practice.

Uploaded by

VINAY B.S
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPT, PDF, TXT or read online on Scribd
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Compound Interest

and
Simple 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
If the interest on a sum borrowed for certain period is
reckoned uniformly, then it is called simple interest.
Let Principal = P, Rate = R% per annum (p.a.)
and Time = T years. Then

Simple Interest =(P x R x T)/100


Q1) Reena took a loan of Rs. 1200 with simple
interest for as many years as the rate of interest. If
she paid Rs. 432 as interest at the end of the loan
period, what was the rate of interest?

A. 3.6
B. 6
C. 18
D. Cannot be determined
• Ans:B
Q2) A man took loan from a bank at the rate of 12%
p.a. simple interest. After 3 years he had to pay Rs.
5400 interest only for the period. The principal
amount borrowed by him was:
a)2000
b)10000
c)15000
d)20000
• Ans: C
Q3) Priya borrowed some money at the rate of 6%
per annum for the first 3yr, at the rate of 9% per
annum for the next 5yr and at the rate of 13% per
annum for the period beyond 8yr. If she pays a total
interest of Rs. 8160 at the end of 11yr. how much
money did she borrow?
a)12000
b)10000
c)8000
d)None of these
• Ans: C
Q4) How much time will it take for an amount of Rs.
450 to yield Rs. 81 as interest at 4.5% per annum of
simple interest?
a)3.5 yrs
b)4 yrs
c)4.5 yrs
d)5 yrs
• Ans: B
Q5)A sum of money invested for a certain number of
years at 8% p.a. simple interest grows to Rs.180. The
same sum of money invested for the same number of
years at 4% p.a. simple interest grows to Rs.120 only.
For how many years was the sum invested?
a)25
b)15
c)20
d)22
• Ans: A
Q6) If a sum of money at simple interest doubles
in 6 years, it will become 4 times in:

A. 12 years
B. 14 years
C. 16 years
D. 18 years
• Ans: D
Compound Interest
Compound interest is the interest earned not only on
the original principal, but also on all interests earned
previously
Let Principal = P, Rate = R% per annum, Time
= n years.
1.When interest is compounded Annually:
Amount=p(1+R/100)^n

2. When interest is compounded Half-yearly:


Amount=p[1+(R/2)/100]^2n

3. When interest is compounded Quarterly:


Amount=p[1+(R/4)/100]^4n
4.Difference between SI and CI for 2 years is
P(R/100)^2

Difference between SI and CI for 3 years is


3P(R/100)^2 + P(R/100)^3
Q)The compound interest on Rs. 30,000 at 7% per
annum is Rs. 4347. The period (in years) is:
a)2
b)3
c)4
d)5
• Ans: A
Q) If Rs. 500 amounts to Rs. 583.20 in two years
compounded annually, find the rate of interest per
annum?
a)6%
b)7%
c)8%
d)9%
• Ans: C
Q)What will be the compound interest on a sum of
Rs. 50,000 after 3 years at the rate of 10 % p.a.?
a)15650
b)16550
c)16450
d)15465
• Ans: B
Q) The compound interest on a sum of money for 2
years is rs.832 and the simple interest on the same
sum for the same period is rs.800. The difference
between the compound interest and simple interest
for 3 years is
a)48
b)66.56
c)98.56
d)None
Q) The population of a town was 3600 three years
back. It is 4800 right now. What will be the
population three years down the line, if the rate of
growth of population has been constant over the
years and has been compounding annually?
a)6000
b)6500
c)6400
d)6600
• Ans:C
• Explanation:
• The population grew from 3600 to 4800 in 3 years. That is a
growth of 1200 on 3600 during three year span.
• Therefore, the rate of growth for three years has been
constant.
• The rate of growth during the next three years will also be the
same.
• Therefore, the population will grow by 4800 * 1/3 =1600
• Hence, the population three years from now will be 4800 +
1600 = 6400
Q)A sum of rupees 10000 becomes 14400
compounded annually with rate of interest 20%. Find
the number of years?
a)1 yrs
b)2 yrs
c)3 yrs
d)4 yrs
• Ans: B

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