Compound Interest Questions Answers

• 1. Find the compound interest on Rs. 7500 at 4% per annum for 2 years, compounded annually.

  1. Rs. 610
  2. Rs. 612
  3. Rs. 614
  4. Rs. 616

  Answer And Explanation

  Answer: Option B

  Explanation:

  $$\begin{aligned} Amount = [7500 \times (1+ \frac{4}{100})^2] \\ = (7500 \times \frac{26}{25} \times \frac{26}{25}) \\ = 8112 \\ \end{aligned}$$
  
  So compound interest = (8112 - 7500) = 612

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• 2. Albert invested amount of 8000 in a fixed deposit for 2 years at compound interest rate of 5 % per annum. How much Albert will get on the maturity of the fixed deposit.

  1. Rs. 8510
  2. Rs. 8620
  3. Rs. 8730
  4. Rs. 8820

  Answer And Explanation

  Answer: Option D

  Explanation:

  $$\begin{aligned} => (8000 \times(1+\frac{5}{100})^2) \\ => 8000 \times \frac{21}{20}\times \frac{21}{20} \\ => 8820 \end{aligned}$$
  

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• 3. What will be the compound interest on Rs. 25000 after 3 years at the rate of 12 % per annum

  1. Rs 10123.20
  2. Rs 10123.30
  3. Rs 10123.40
  4. Rs 10123.50

  Answer And Explanation

  Answer: Option A

  Explanation:

  $$\begin{aligned} (25000 \times (1 + \frac{12}{100})^3) \\ => 25000\times\frac{28}{25}\times\frac{28}{25}\times\frac{28}{25} \\ => 35123.20 \\ \end{aligned}$$
  
  So Compound interest will be 35123.20 - 25000
  = Rs 10123.20

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• 4. A man saves Rs 200 at the end of each year and lends the money at 5% compound interest. How much will it become at the end of 3 years.

  1. Rs 662
  2. Rs 662.01
  3. Rs 662.02
  4. Rs 662.03

  Answer And Explanation

  Answer: Option C

  Explanation:

  $$\begin{aligned} [200(1+\frac{5}{100})^3 + 200(1+\frac{5}{100})^2+ \\ 200(1+\frac{5}{100})] = [200(\frac{21}{20} \times \frac{21}{20} \times \frac{21}{20})\\ + 200(\frac{21}{20}\times\frac{21}{20})+200(\frac{21}{20})] \\ = 662.02 \end{aligned}$$

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• 5. Find compound interest on Rs. 7500 at 4% per annum for 2 years, compounded annually

  1. Rs 312
  2. Rs 412
  3. Rs 512
  4. Rs 612

  Answer And Explanation

  Answer: Option D

  Explanation:

  Please apply the formula
  
  $$\begin{aligned} Amount = P(1+\frac{R}{100})^n \\ \text{C.I. = Amount - P} \end{aligned}$$

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• 6. Find the compound interest on Rs.16,000 at 20% per annum for 9 months, compounded quarterly

  1. Rs 2520
  2. Rs 2521
  3. Rs 2522
  4. Rs 2523

  Answer And Explanation

  Answer: Option C

  Explanation:

  Please remember, when we have to calculate C.I. quarterly then we apply following formula if n is the number of years
  
  $$\begin{aligned} Amount = P(1+\frac{\frac{R}{4}}{100})^{4n} \end{aligned}$$
  
  Principal = Rs.16,000;
  Time=9 months = 3 quarters;
  Rate = 20%, it will be 20/4 = 5%
  
  So lets solve this question now,
  
  $$\begin{aligned} Amount = 16000(1+\frac{5}{100})^3 \\ = 18522\\ C.I = 18522 - 16000 = 2522 \end{aligned}$$

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• 7. The present worth of Rs.169 due in 2 years at 4% per annum compound interest is

  1. Rs 155.25
  2. Rs 156.25
  3. Rs 157.25
  4. Rs 158.25

  Answer And Explanation

  Answer: Option B

  Explanation:

  In this type of question we apply formula
  $$\begin{aligned} Amount = \frac{P}{(1+\frac{R}{100})^n} \\ Amount = \frac{169}{(1+\frac{4}{100})^2} \\ Amount = \frac{169 * 25 * 25}{26*26} \\ Amount = 156.25 \end{aligned}$$

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