Simple and Compound Interest for Competitive Exam Prep

Simple and Compound Interest

Q. A loan of $2000 is taken for 3 years at a simple interest rate of 7%. What is the total interest paid?

A. $280
B. $300
C. $350
D. $420

Solution

SI = (P * r * t) / 100 = (2000 * 7 * 3) / 100 = $420.

Correct Answer: A — $280

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Q. A person borrows $5000 at a rate of 8% per annum for 4 years. What is the total amount to be paid back?

A. $6000
B. $6400
C. $6800
D. $7200

Solution

Total Amount = Principal + Simple Interest = 5000 + (5000 * 8 * 4) / 100 = 5000 + 1600 = $6600.

Correct Answer: B — $6400

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Q. A sum of $1000 is invested at a compound interest rate of 5% per annum. What will be the amount after 4 years?

A. $1200
B. $1215.51
C. $1250
D. $1300

Solution

Total Amount = P(1 + r/100)^n = 1000(1 + 0.05)^4 = 1000(1.21550625) = $1215.51.

Correct Answer: B — $1215.51

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Q. A sum of $800 is invested at a rate of 5% per annum for 3 years. What will be the total amount at the end of 3 years?

A. $920
B. $840
C. $860
D. $880

Solution

Total Amount = Principal + Simple Interest = 800 + (800 * 5 * 3) / 100 = 800 + 120 = $920.

Correct Answer: B — $840

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Q. If a sum of money doubles itself in 5 years at simple interest, what is the rate of interest?

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

Solution

Rate = (100 * Principal) / (Principal * Time) = (100 * 1) / (1 * 5) = 20%. Therefore, the rate of interest is 20%.

Correct Answer: A — 10%

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Q. If a sum of money is invested at a compound interest rate of 12% per annum, how much will it grow in 2 years if the principal is $1500?

A. $1680
B. $1690
C. $1700
D. $1710

Solution

Total Amount = P(1 + r/100)^n = 1500(1 + 0.12)^2 = 1500(1.2544) = $1881.60.

Correct Answer: A — $1680

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Q. If the compound interest on a certain sum for 2 years at 10% per annum is $121, what is the principal amount?

A. $1000
B. $1100
C. $1200
D. $1300

Solution

Let Principal = P. Then, CI = P(1 + r/100)^n - P = P(1 + 0.1)^2 - P = P(1.21 - 1) = 0.21P. Given CI = 121, we have 0.21P = 121, thus P = 121 / 0.21 = $1000.

Correct Answer: A — $1000

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Q. If the simple interest on a sum of money is $300 in 5 years at a rate of 6% per annum, what is the principal?

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

Solution

SI = (P * r * t) / 100. Thus, 300 = (P * 6 * 5) / 100. Therefore, P = (300 * 100) / (6 * 5) = $1000.

Correct Answer: B — $1200

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Q. What is the compound interest on $5000 at a rate of 10% per annum for 2 years?

A. $1000
B. $1100
C. $1200
D. $1210

Solution

CI = P(1 + r/100)^n - P = 5000(1 + 0.10)^2 - 5000 = 5000(1.21) - 5000 = $1050.

Correct Answer: D — $1210

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Q. What will be the compound interest on $2000 for 3 years at a rate of 6% per annum?

A. $360
B. $400
C. $420
D. $450

Solution

CI = P(1 + r/100)^n - P = 2000(1 + 0.06)^3 - 2000 = 2000(1.191016) - 2000 = 2382.032 - 2000 = $382.032.

Correct Answer: C — $420

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Simple and Compound Interest

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