Simple & Compound Interest for Competitive Exam Success

Simple & Compound Interest

Q. If a sum of money is invested at a compound interest rate of 12% per annum, how long will it take for the investment to double?

A. 5 years
B. 6 years
C. 7 years
D. 8 years

Solution

Using the rule of 72, we estimate the time to double as 72/12 = 6 years.

Correct Answer: B — 6 years

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Q. If a sum of money is invested at a compound interest rate of 6% per annum, how much will it grow in 5 years?

A. Rs. 1349.86
B. Rs. 1200
C. Rs. 1500
D. Rs. 1600

Solution

Using A = P(1 + r)^t, A = 1000(1 + 0.06)^5 = 1000 * 1.338225 = 1338.23.

Correct Answer: A — Rs. 1349.86

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Q. If a sum of money is invested at a rate of 6% per annum, how long will it take for the investment to triple at simple interest?

A. 15 years
B. 20 years
C. 25 years
D. 30 years

Solution

Using the formula A = P(1 + rt), we have 3P = P(1 + 0.06t). Solving gives t = 20 years.

Correct Answer: B — 20 years

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Q. If a sum of money is invested at a simple interest rate of 6% per annum, how much interest will be earned on a principal of $8000 after 4 years? (1920)

A. $1920
B. $2400
C. $3200
D. $4800

Solution

Using SI = PRT, SI = 8000 * 0.06 * 4 = $1920.

Correct Answer: B — $2400

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Q. If a sum of money triples itself in 15 years at simple interest, what is the rate of interest?

A. 5%
B. 6.67%
C. 10%
D. 15%

Solution

If the sum triples, the interest earned is 2P in 15 years. Thus, 2P = PRT implies R = 2/15 = 13.33%, which is approximately 6.67%.

Correct Answer: B — 6.67%

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Q. If a sum of Rs. 1200 is invested at a compound interest rate of 5% per annum, what will be the amount after 3 years?

A. Rs. 1386.25
B. Rs. 1350
C. Rs. 1400
D. Rs. 1300

Solution

Using the formula A = P(1 + r)^t, A = 1200(1 + 0.05)^3 = 1200 * 1.157625 = 1389.15.

Correct Answer: A — Rs. 1386.25

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Q. If the amount after 2 years at compound interest is Rs. 1210 and the principal is Rs. 1000, what is the rate of interest?

A. 10%
B. 5%
C. 12%
D. 15%

Solution

Using the formula A = P(1 + r)^t, we have 1210 = 1000(1 + r)^2. Solving gives r = 0.1 or 10%.

Correct Answer: A — 10%

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Q. If the compound interest on a sum of money for 2 years is $400 and the principal is $1600, what is the rate of interest? (2023)

A. 10%
B. 12.5%
C. 15%
D. 20%

Solution

Using the formula CI = P[(1 + r)^n - 1], we can set up the equation 400 = 1600[(1 + r)^2 - 1]. Solving gives r = 12.5%.

Correct Answer: B — 12.5%

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Q. If the difference between the compound interest and simple interest on a certain sum of money for 2 years at 10% per annum is $50, what is the principal? (2000)

A. $1000
B. $1200
C. $1500
D. $2000

Solution

The difference between compound interest and simple interest for 2 years is given by SI * (r/100)^2. Setting this equal to $50 and solving gives Principal = $1200.

Correct Answer: B — $1200

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Q. If the difference between the compound interest and simple interest on a certain sum of money for 2 years at 10% is $50, what is the principal? (2000)

A. $1000
B. $1200
C. $1500
D. $2000

Solution

The difference between CI and SI for 2 years is given by P * (r^2)/100^2. Setting this equal to $50 and solving gives P = $1500.

Correct Answer: C — $1500

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Q. If the difference between the compound interest and simple interest on a sum of money for 2 years at 10% per annum is $50, what is the principal? (2000)

A. $1000
B. $1200
C. $1500
D. $2000

Solution

The difference SI and CI for 2 years is given by P * r^2 / 200. Setting this equal to 50 gives P = $1500.

Correct Answer: C — $1500

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Q. If the principal amount is $2000 and the total amount after 3 years at a certain rate of simple interest is $2400, what is the rate of interest? (2000)

A. 5%
B. 6.67%
C. 10%
D. 12%

Solution

The interest earned is $400. Using SI = PRT, we have 400 = 2000 * R * 3. Solving for R gives R = 6.67%.

Correct Answer: B — 6.67%

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Q. If the principal is $2000 and the rate of interest is 4% per annum, what will be the total amount after 5 years at simple interest? (2000)

A. $2400
B. $2500
C. $2600
D. $2700

Solution

Using A = P + SI, where SI = P * r * t / 100, we have SI = 2000 * 4 * 5 / 100 = $400. Thus, A = 2000 + 400 = $2400.

Correct Answer: A — $2400

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Q. If the principal is $800 and the rate of interest is 4% per annum, what will be the total amount after 3 years at simple interest?

A. $840
B. $850
C. $860
D. $870

Solution

Using the simple interest formula, Total Amount = Principal + SI = 800 + (800 * 4 * 3) / 100 = $840.

Correct Answer: A — $840

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Q. If the principal is $800 and the rate of interest is 6% per annum, what will be the total amount after 4 years at simple interest?

A. $960
B. $1040
C. $800
D. $840

Solution

Total amount = Principal + SI = 800 + (800 * 6/100 * 4) = $1040.

Correct Answer: B — $1040

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Q. If the principal is Rs. 5000 and the rate of interest is 12% per annum, what will be the total amount after 3 years under simple interest?

A. Rs. 5600
B. Rs. 5800
C. Rs. 6000
D. Rs. 6200

Solution

Simple Interest = P * r * t = 5000 * 0.12 * 3 = 1800. Total Amount = Principal + Interest = 5000 + 1800 = 6800.

Correct Answer: B — Rs. 5800

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Q. If the simple interest on a certain sum for 3 years at 5% per annum is $150, what is the principal amount?

A. $1000
B. $1200
C. $1500
D. $1800

Solution

Using SI = PRT, we have 150 = P * 0.05 * 3. Solving for P gives P = 1000.

Correct Answer: A — $1000

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Q. If the simple interest on a sum of money for 5 years is $300 at a rate of 4% per annum, what is the principal? (2000)

A. $1200
B. $1500
C. $1800
D. $2000

Solution

Using SI = PRT, we have 300 = P * 4/100 * 5. Solving for P gives P = $1500.

Correct Answer: A — $1200

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Q. In how many years will a sum of money triple itself at 10% per annum compound interest? (2023)

A. 10 years
B. 12 years
C. 15 years
D. 20 years

Solution

Using the formula A = P(1 + r)^n, we set 3P = P(1 + 0.1)^n. Solving gives n ≈ 12 years.

Correct Answer: B — 12 years

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Q. In how many years will a sum of money triple itself at a compound interest rate of 10% per annum?

A. 10 years
B. 12 years
C. 15 years
D. 20 years

Solution

Using the formula A = P(1 + r)^n, we set A = 3P and solve for n, which gives approximately 12 years.

Correct Answer: B — 12 years

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Q. What is the difference between the amounts obtained by investing $1000 at 8% per annum for 2 years in simple interest and compound interest?

A. $16
B. $24
C. $32
D. $40

Solution

SI = 1000 * 8/100 * 2 = $160. CI = 1000(1 + 0.08)^2 = $1166.4. Difference = $1166.4 - $160 = $24.

Correct Answer: B — $24

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Q. What is the difference between the compound interest and simple interest on a sum of $1000 at 5% per annum after 2 years? (2023)

A. $10
B. $20
C. $30
D. $40

Solution

SI = 1000 * 5 * 2 / 100 = $100. CI = 1000[(1 + 0.05)^2 - 1] = $102.5. The difference is $2.5.

Correct Answer: B — $20

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Q. Which of the following is a key difference between simple and compound interest?

A. Simple interest is calculated on the principal only.
B. Compound interest is calculated on the total amount.
C. Both are calculated differently.
D. All of the above.

Solution

All statements are true; simple interest is calculated only on the principal, while compound interest is calculated on the total amount including interest.

Correct Answer: D — All of the above.

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Q. Which of the following statements is true regarding simple and compound interest?

A. Simple interest is always greater than compound interest.
B. Compound interest is always greater than simple interest.
C. Both are equal after a certain time.
D. None of the above.

Solution

Compound interest will always be greater than simple interest for the same principal, rate, and time, except for the case of zero interest.

Correct Answer: B — Compound interest is always greater than simple interest.

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Simple & Compound Interest

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