simple-and-compound-interest

Simple and Compound Interest

Simple and Compound Interest: Difference between simple and compound interest, Simple Interest Formula and Compound Interest Formula, Simple Interest Questions

Simple and Compound Interest: Difference between simple and compound interest, Simple Interest Formula and Compound Interest Formula, Simple Interest Questions

    1 Tips

learning-pundits-content-team

Learning Pundits Content Team

Written on Sep 30, 2017 5:32:16 PM

3 TIPS on cracking Aptitude Questions on Simple and Compound Interest

Looking for Questions instead of tips? - You can directly jump to  Aptitude Test Questions on Simple and Compound Interest

Tip #1: Understand the formulae


1.    Amount to be repaid after N years if simple interest is applied = P + (P x N x R) = P (1 + N x R)

2.    Simple Interest = P x N x R

3.    Amount to be repaid after N years if interest is compounded = P [(1 + R)^N]

4.    Compound Interest = [P x (1 + R)^N] - P

Question: Simple interest on a certain sum of money for 3 years at 8% per annum is half the compound interest on Rs.4000 for 2 years at 10% per annum. Calculate the principal placed on simple interest.

Solution:

Let the Principal be Rs. P

Then, SI = (P x R x T) = 0.24P

Given CI = 4000(1 + 0.1)2 – 4000 = 4000(1.21 – 1) =4000 x 0.21

According to the question,

0.24P = 2000 x 0.21

=>    P = 2000 x 0.21 / 0.24 = 2000 x 7 / 8 = Rs. 1750

Are you engaged in a Job Search? - You can get your Resume/ CV reviewed for free and then apply for jobs/ internships.

Tip #2: If the interest rate is applied on a half-yearly, quarterly or monthly basis, the effective annual rate is calculated by compounding the interest



Question: What is the effective annual rate of interest corresponding to a nominal rate of 6% per annum payable half-yearly?

Solution:

Let the Principal be Rs. P.

Now, the rate is 6% per annum but the interest has to be paid twice a year (i.e.) an interest of 3% is applied every 6 months.

Amount to be repaid after 1 year = P x 1.03 x 1.03 = 1.0609P

=> Effective Annual Rate of interest = 6.09%


Tip #3: Use logarithms to find the time when compound rates are applied


1.    log 2 = 0.301

2.    log 3 = 0.477        

3.    log 4 = 0.602

4.    log 5 = 0.699        

5.    log 6 = 0.778

6.    log 7 = 0.845

Question: At 3% annual interest compounded monthly, how long will it take to double your money?

Solution:

Let the number of months be n and the Principal be Rs. P.

Then, P(1 + 0.03)n = 2P

=>  (1 + 0.03)n = 2

=>    n log ( 1.03) = log 2

=>    n = log 2 / log 1.03 = 0.301 / 0.128 = 23.5

Thus. It’ll take 1 year and 11.5 months.

Are you interested in getting Certificates to boost your Resume? Participate in our Online Grammar and Aptitude Contests. It only takes 20 mins. All participants get Participation Certificates while the top 100 winners get Amazon Cash Vouchers every week. Participate NOW!


As a gesture of support, please follow us on Facebook and Youtube

Become a Campus Ambassador for LearningPundits - Promote our Weekly Online Contests to other students in your Campus via Posters, Facebook, WhatsApp, Email and face to face communication. You will receive a stipend based on your performance and an Internship Certificate to boost your Resume. Email your Resume to support@learningpundits.com
simple-and-compound-interest

Simple and Compound Interest

Simple and Compound Interest: Difference between simple and compound interest, Simple Interest Formula and Compound Interest Formula, Simple Interest Questions

{{sectionSubheading}}

    {{sectionContentCount}} {{contentCountNoun}}



Weekly Contests Leaderboard


Rank - {{getRank($index,weeklyWinner)}}: {{weeklyWinner.userName}}

Loading...

« Previous Next »

Subscribe to our RSS Feed