You are on page 1of 44

# SI MPLE

I NTEREST
MODULE OBJECTIVE
Interest
Interest is the cost of borrowing money. An interest rate is the cost stated as a percent of the
amount borrowed per period of time, usually one year.
Simple Interest
Simple interest is calculated on the original principal only. Accumulated interest from prior
periods is not used in calculations for the following periods. Simple interest is normally used for
a single period of less than a year, such as 30 or 60 days.
S|mp|e Interest = ( *k*1)]100
where:
P = principal (original amount borrowed or loaned)
R= interest rate for one period
T = number of periods
IMPORTANT FORMULA
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 (S.I.):
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
(i). Simple Intereest =
P x R x T
100
SOLVED EXAMPLES
1. A sum of money at simple interest amounts to Rs. 815 in 3 years and to Rs. 854 in 4
years. The sum is:
A.Rs. 650 B.Rs. 690
C.Rs. 698 D.Rs. 700
Explanation:
S.I. for 1 year = Rs. (854 - 815) = Rs. 39.
S.I. for 3 years = Rs.(39 x 3) = Rs. 117.
Principal = Rs. (815 - 117) = Rs. 698.
2. Mr. Thomas invested an amount of Rs. 13,900 divided in two different schemes A and B
at the simple interest rate of 14% p.a. and 11% p.a. respectively. If the total amount of
simple interest earned in 2 years be Rs. 3508, what was the amount invested in Scheme B?
A.Rs. 6400 B.Rs. 6500
C.Rs. 7200 D.Rs. 7500
E. None of these
(ii). P =
100 x S.I.
; R =
100 x S.I.
and T =
100 x S.I.
.
R x T P x T P x R
Explanation:
Let the sum invested in Scheme A be Rs. x and that in Scheme B be Rs. (13900 - x).
Then,
x x 14 x 2
+
(13900 - x) x 11 x 2
= 3508
100 100
28x - 22x = 350800 - (13900 x 22)
6x = 45000
x = 7500.
So, sum invested in Scheme B = Rs. (13900 - 7500) = Rs. 6400.
3. A sum fetched a total simple interest of Rs. 4016.25 at the rate of 9 p.c.p.a. in 5 years.
What is the sum?
A.Rs. 4462.50 B.Rs. 8032.50
C.Rs. 8900 D.Rs. 8925
E. None of these
Explanation:
Principal= Rs.
100 x 4016.25
9 x 5
= Rs.
401625
45
= Rs. 8925.
4. 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 years B.4 years
C. 4.5 years D.5 years
Explanation:
Time =
100 x 81
years
= 4 years.
450 x 4.5
5. 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
Explanation:
Let rate = R% and time = R years.
Then,
1200 x R x R
= 432
100
12R
2
= 432
R
2
= 36
R = 6.
6. A sum of Rs. 12,500 amounts to Rs. 15,500 in 4 years at the rate of simple interest. What
is the rate of interest?
A.3% B.4%
C.5% D.6%
E. None of these
Explanation:
S.I. = Rs. (15500 - 12500) = Rs. 3000.
Rate =
100 x 3000
%
= 6%
12500 x 4
7. A person takes a loan of Rs. 200 at 5% simple interest. He returns Rs. 100 at the end of 1
year. In order to clear his dues at the end of 2 years, he would pay:
A.Rs. 105 B.Rs. 110
C.Rs. 115 D.Rs. 115.50
Explanation:
Amount to be paid
= Rs. 115.
8. An automobile financier claims to be lending money at simple interest, but he includes
the interest every six months for calculating the principal. If he is charging an interest of
10%, the effective rate of interest becomes:
A.10% B.10.25%
C.10.5% D.None of these
Explanation:
Let the sum be Rs. 100. Then,
S.I. for first 6 months = Rs.
100 x 10 x 1
= Rs. 5
100 x 2
S.I. for last 6 months = Rs.
105 x 10 x 1
= Rs. 5.25
100 x 2
So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25
Effective rate = (110.25 - 100) = 10.25%
9.A lent Rs. 5000 to B for 2 years and Rs. 3000 to C for 4 years on simple interest at the
same rate of interest and received Rs. 2200 in all from both of them as interest. The rate of
interest per annum is:
A.5% B.7%
C.7
1
%
8
D.10%
Explanation:
Let the rate be R% p.a.
Then,
5000 x R x 2
+
3000 x R x 4
= 2200.
100 100
100R + 120R = 2200
R =
2200
= 10.
220
Rate = 10%.
= Rs. 100 +
200 x 5 x 1
+
100 x 5 x 1
100 100
10.A sum of Rs. 725 is lent in the beginning of a year at a certain rate of interest. After 8
months, a sum of Rs. 362.50 more is lent but at the rate twice the former. At the end of the
year, Rs. 33.50 is earned as interest from both the loans. What was the original rate of
interest?
A.3.6% B.4.5%
C.5% D.6%
E. None of these
Explanation:
Let the original rate be R%. Then, new rate = (2R)%.
Note:
Here, original rate is for 1 year(s); the new rate is for only 4 months i.e. year(s).
725 x R x 1
+
362.50 x 2R x 1
= 33.50
100 100 x 3
(2175 + 725) R = 33.50 x 100 x 3
(2175 + 725) R = 10050
(2900)R = 10050
R =
10050
= 3.46
2900
Original rate = 3.46%
11. 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.Rs. 2000 B.Rs. 10,000
C.Rs. 15,000 D.Rs. 20,000
Explanation:
Principal = Rs.
100 x 5400
= Rs. 15000.
12 x 3
12. A sum of money amounts to Rs. 9800 after 5 years and Rs. 12005 after 8 years at the
same rate of simple interest. The rate of interest per annum is:
A.5% B.8%
C.12% D.15%
Explanation:
S.I. for 3 years = Rs. (12005 - 9800) = Rs. 2205.
S.I. for 5 years = Rs.
2205
x 5 = Rs. 3675
3
Principal = Rs. (9800 - 3675) = Rs. 6125.
Hence, rate =
100 x 3675
%
= 12%
6125 x 5
13. What will be the ratio of simple interest earned by certain amount at the same rate of
interest for 6 years and that for 9 years?
A.1 : 3 B.1 : 4
E. None of these
Explanation:
Let the principal be P and rate of interest be R%.
Required ratio =
P x R x 6
100
=
6PR
=
6
= 2 : 3.
P x R x 9
100
9PR 9
14. A certain amount earns simple interest of Rs. 1750 after 7 years. Had the interest been
2% more, how much more interest would it have earned?
A.Rs. 35 B.Rs. 245
C.Rs. 350 D.Cannot be determined
E. None of these
Explanation:
We need to know the S.I., principal and time to find the rate.
Since the principal is not given, so data is inadequate.
15. A person borrows Rs. 5000 for 2 years at 4% p.a. simple interest. He immediately lends
it to another person at 6 p.a for 2 years. Find his gain in the transaction per year.
A.Rs. 112.50 B.Rs. 125
C.Rs. 150 D.Rs. 167.50
Explanation:
Gain in 2 years= Rs. 5000 x
25
x
2
-
5000 x 4 x 2
4 100 100
= Rs. (625 - 400)
= Rs. 225.
Gain in 1 year = Rs.
225
= Rs. 112.50
2
16.A father left a will of Rs.35 lakhs between his two daughters aged 8.5 and 16 such that
they may get equal amounts when each of them reach the age of 21 years. The original
amount of Rs.35 lakhs has been instructed to be invested at 10% p.a. simple interest. How
much did the elder daughter get at the time of the will?
(A) Rs. 17.5 lakhs (B) Rs. 21 lakhs (C) Rs. 15 lakhs (4D Rs. 20 lakhs
So|ut|on:
LeL 8s.x be Lhe amounL LhaL Lhe elder daughLer goL aL Lhe Llme of Lhe wlll. 1herefore, Lhe younger
daughLer goL (3,300,000 - x).
1he elder daughLer's money earns lnLeresL for (21 - 16) = 3 years [ 10 p.a slmple lnLeresL
1he younger daughLer's money earns lnLeresL for (21 - 8.3) = 12.3 years [ 10 p.a slmple lnLeresL.
As Lhe sum of money LhaL each of Lhe daughLers geL when Lhey are 21 ls Lhe same,
x + = (3,300,000 - x) +
=> x + = 3,300,000 - x + -
=> 2x + = 3,300,000 (1 + )
Since the principal is not given, so data is inadequate.
15. A person borrows Rs. 5000 for 2 years at 4% p.a. simple interest. He immediately lends
it to another person at 6 p.a for 2 years. Find his gain in the transaction per year.
A.Rs. 112.50 B.Rs. 125
C.Rs. 150 D.Rs. 167.50
Explanation:
Gain in 2 years= Rs. 5000 x
25
x
2
-
5000 x 4 x 2
4 100 100
= Rs. (625 - 400)
= Rs. 225.
Gain in 1 year = Rs.
225
= Rs. 112.50
2
16.A father left a will of Rs.35 lakhs between his two daughters aged 8.5 and 16 such that
they may get equal amounts when each of them reach the age of 21 years. The original
amount of Rs.35 lakhs has been instructed to be invested at 10% p.a. simple interest. How
much did the elder daughter get at the time of the will?
(A) Rs. 17.5 lakhs (B) Rs. 21 lakhs (C) Rs. 15 lakhs (4D Rs. 20 lakhs
So|ut|on:
LeL 8s.x be Lhe amounL LhaL Lhe elder daughLer goL aL Lhe Llme of Lhe wlll. 1herefore, Lhe younger
daughLer goL (3,300,000 - x).
1he elder daughLer's money earns lnLeresL for (21 - 16) = 3 years [ 10 p.a slmple lnLeresL
1he younger daughLer's money earns lnLeresL for (21 - 8.3) = 12.3 years [ 10 p.a slmple lnLeresL.
As Lhe sum of money LhaL each of Lhe daughLers geL when Lhey are 21 ls Lhe same,
x + = (3,300,000 - x) +
=> x + = 3,300,000 - x + -
=> 2x + = 3,300,000 (1 + )
Since the principal is not given, so data is inadequate.
15. A person borrows Rs. 5000 for 2 years at 4% p.a. simple interest. He immediately lends
it to another person at 6 p.a for 2 years. Find his gain in the transaction per year.
A.Rs. 112.50 B.Rs. 125
C.Rs. 150 D.Rs. 167.50
Explanation:
Gain in 2 years= Rs. 5000 x
25
x
2
-
5000 x 4 x 2
4 100 100
= Rs. (625 - 400)
= Rs. 225.
Gain in 1 year = Rs.
225
= Rs. 112.50
2
16.A father left a will of Rs.35 lakhs between his two daughters aged 8.5 and 16 such that
they may get equal amounts when each of them reach the age of 21 years. The original
amount of Rs.35 lakhs has been instructed to be invested at 10% p.a. simple interest. How
much did the elder daughter get at the time of the will?
(A) Rs. 17.5 lakhs (B) Rs. 21 lakhs (C) Rs. 15 lakhs (4D Rs. 20 lakhs
So|ut|on:
LeL 8s.x be Lhe amounL LhaL Lhe elder daughLer goL aL Lhe Llme of Lhe wlll. 1herefore, Lhe younger
daughLer goL (3,300,000 - x).
1he elder daughLer's money earns lnLeresL for (21 - 16) = 3 years [ 10 p.a slmple lnLeresL
1he younger daughLer's money earns lnLeresL for (21 - 8.3) = 12.3 years [ 10 p.a slmple lnLeresL.
As Lhe sum of money LhaL each of Lhe daughLers geL when Lhey are 21 ls Lhe same,
x + = (3,300,000 - x) +
=> x + = 3,300,000 - x + -
=> 2x + = 3,300,000 (1 + )
=> = (3,300,000)
=> x = 2,100,000 = 21 lakhs.
DATA SUFFICIENCY PROBLEMS
DIRECTION TO USE
Each of the questions given below consists of a statement and / or a question and two statements
numbered I and II given below it. You have to decide whether the data provided in the
statement(s) is / are sufficient to answer the given question. Read the both statements and
Give answer (A) if the data in Statement I alone are sufficient to answer the question,
while the data in Statement II alone are not sufficient to answer the question.
Give answer (B) if the data in Statement II alone are sufficient to answer the question,
while the data in Statement I alone are not sufficient to answer the question.
Give answer (C) if the data either in Statement I or in Statement II alone are sufficient to
Give answer (D) if the data even in both Statements I and II together are not sufficient to
Give answer(E) if the data in both Statements I and II together are necessary to answer
the question.
1. The simple interest on a sum of money is Rs. 50. What is the sum?
I. The interest rate is 10% p.a.
II. The sum earned simple interest in 10 years.
A.I alone sufficient while II alone not sufficient to answer
B.II alone sufficient while I alone not sufficient to answer
C.Either I or II alone sufficient to answer
D.Both I and II are not sufficient to answer
E. Both I and II are necessary to answer
Explanation:
Given : S.I. = Rs. 50.
I gives, R = 10% p.a.
II gives, T = 10 years.
Sum =
100 x S.I.
= Rs.
100 x 50
= Rs. 50.
T x R 10 x 10
Thus, I and II together give the answer.
2. What is the sum which earned interest?
I. The total simple interest was Rs. 7000 after 7 years.
II. The total of sum and simple interest was double of the sum after 5 years.
A.I alone sufficient while II alone not sufficient to answer
B.II alone sufficient while I alone not sufficient to answer
C.Either I or II alone sufficient to answer
D.Both I and II are not sufficient to answer
E. Both I and II are necessary to answer
Explanation:
Let the sum be Rs. x.
I gives, S.I. = Rs. 7000 and T = 7 years.
II gives, Sum + S.I. for 5 years = 2 x Sum Sum = S.I. for 5 years.
Now, S.I. for 7 years = Rs. 7000.
S.I. for 1 year = Rs.
7000
= Rs. 1000.
7
Thus, I and II both are needed to get the answer.
.
EXERCISE PROBLEM
. Ex.l Find: S.l. on Rs 68000 at 16
2/3
%per annum for 9 months.
Sol. P = 68000, R = 50/3 % p.a. & T = 9/12 year = 3/4 years.
.. S.I. = ( PxRxT/100)
= Rs. [6800 x 50/3 x x 1/100] = Rs. 8500
Ex.2 Find: S.l. on Rs 6250 at 14%per annum for 146 days.
Sol.
P = Rs. 6250, R = 14 % p.a. & T = (146/365) year = 2/5 year .
:. S.l. = Rs (6250 x 14 x 2/5 x 1/100)= Rs 350.
Ex.3 Find: S.l. on Rs 3000 at 18%per annum for the period from 4th
Sol.
Time = (24 + 31 + 18) days = 73 days = 1/5 year .
P = Rs 3000 and R = 18 % p.a.
:. S.I. = Rs (3000 x 18 x 1/5 x 1/100)= Rs 108 .
Remark: The day on which money is deposited is not counted while the day on which money is
withdrawn is counted.
Ex. 4. A sum at simple interest at 13 i % per annum amounts to Rs. 2502.50 after 4 years.
Find the sum.
Sol. Let sum be x. Then
S.I. = (X x 27/2 x 4 x 1/100) = 27X/50
.. Amount = ( X + 27X/50) = 77X/50
.. 77X/50 = 2502.50 or X= (2502.50 X 50)/77 = 1625
Hence Sum = Rs.1625
Ex. 5. A certain sum of money amounts to Rs 1008 in 2 years and to Rs 1164 in 3 i years. Find
the sum and (be rate of interest.
Sol.
S.I. for 1 years = Rs (1164 - 1008) = Rs 156 .
S.I. for 2 years = Rs (156 x 2/3 x 2)= Rs 208.
:. Principal = Rs (1008 - 208) = Rs 800.
Now, P = 800, T= 2 and S.I. = 208.
.. Rate = (100 x S.I.) / (P x T) =[ (100x208)/(800x2)]% =13%
Ex.6. At what rate percent per annum will a sum of money double in 8 years
Sol. Let principal = P, Then, S.I.=P and Time=8 years
.. Rate = [(100 x P)/ (P x 8)]% = 12.5% per annum..
Ex. 7. A sum was put at simple interest at a certain rate for 3 years. Had it been put at 2%
higher rate, it would have fetched Rs 360 more. Find the sum.
Sol. Let, sum = P and original rate = R. Then,
Px (R+2}x 3 P xRx 3 = 360
100 100
or 3PR + 6P - 3PR = 36000 or 6P = 36000 or P = 6000 . Hence, sum = Rs 6000 .
Ex. 8. Simple interest on a certain sum is 16/25 of the sum. Find the rate percent and time, If
both are numerically equal.
Sol. Let sum = x. Then, S.I. = 16x / 25
Let rate = R % and time = R years.
.. ( X x R x R)/(100) = 16x/25 or R
2
=1600/25 R= 40/5 =8
:. Rate = 8% and Time = 8 years.
Ex. 9. A man borrowed Rs 24000 from two money lenders. For one loan, he paid 15%per
annum and for the other 18%per annum. At the end of one year, he paid Rs 4050. How much
did he borrow at each rate ?
Sol. Let the sum at 15% be Rs x and that at 18% be Rs (24000 - x).
.. {(X x 15 x 1)/100 + {[(2400 x) X 18 X 1]/100} = 4050
or 15 x + 432000 - 18x = 405000 or x = 9000.
:. Money borrowed at 15% = Rs 9000 .
Money borrowed at 18% = Rs 15000.
Ex. 10. What annual instalment wiU discharge a debt of Rs 1092 due in 3 years at 12%simple
interest?
Sol. Let each instalment be Rs. x . then,
{ [x + (X x 12 x 2)/100] + [ X + (X + 12 x 2)/100] + x} =1092
or 28x/25 + 31x/25 +x=1092 or (28x+ 31x+25x) = (1092x25)
or X= {(1092 x 25)/84} = 325
:. Each instalment = Rs. 325
Ex.11 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?
Solution:
From the information provided we know that,
Principal + 8% p.a. interest on principal for n years = 180 .. (1)
Principal + 4% p.a. interest on principal for n years = 120 (2)
Subtracting equation (2) from equation (1), we get
4% p.a. interest on principal for n years = Rs.60.
Now, we can substitute this value in equation (2),
i.e Principal + 60 = 120
= Principal = Rs.60.
We know that SI = , where p is the principal, n the number of years and r the rate percent of
interest.
In equation (2), p = Rs.60, r = 4% p.a. and the simple interest = Rs.60.
Therefore, 60 =
=> n = 100/4 = 25 years.
12. How long will it take for a sum of money to grow from Rs.1250 to Rs.10,000, if it is
invested at 12.5% p.a simple interest?
Solution:
Simple interest is given by the formula SI = (pnr/100), where p is the principal, n is the number
of years for which it is invested, r is the rate of interest per annum
In this case, Rs. 1250 has become Rs.10,000.
Therefore, the interest earned = 10,000 1250 = 8750.
8750 = [(1250*n*12.5)/100]
=> n = 700 / 12.5 = 56 years.
DATA SUFFICIENCY PROBLEMS
1. What percentage of simple interest per annum did Anand pay to Deepak?
I. Anand borrowed Rs. 8000 from Deepak for four years.
II. Anand returned Rs. 8800 to Deepak at the end of two years and settled the loan.
A.I alone sufficient while II alone not sufficient to answer
B.II alone sufficient while I alone not sufficient to answer
C.Either I or II alone sufficient to answer
D.Both I and II are not sufficient to answer
E. Both I and II are necessary to answer
Explanation:
Let the rate be R% p.a.
I gives, P = Rs. 8000 and T = 4 years.
II gives, S.I. = Rs. (8800 - 8000) = Rs. 800.
R =
100 x S.I.
=
100 x 800
%
= 2
1
% p.a.
P x T 8000 x 4 2
Thus, I and II both are needed to get the answer.
2. What is the rate of simple interest?
I. The total interest earned was Rs. 4000.
II. The sum was invested for 4 years.
A.
I alone sufficient while II alone not sufficient to answer
B.
II alone sufficient while I alone not sufficient to answer
C.
Either I or II alone sufficient to answer
D.
Both I and II are not sufficient to answer
E. Both I and II are necessary to answer
Explanation:
We know that, R = 100 x S.I.
P x T
Now, I gives, S.I. = Rs. 4000.
II gives, T = 4 years.
But, P is unknown. So, we cannot find R.
So, given data is insufficient to get R.
3. What is the principal sum?
I. The sum amounts to Rs. 690 in 3 years at S.I.
II. The sum amounts to Rs. 750 in 5 years at S.I.
III. The rate of interest is 5% p.a.
A.l and lll only
8.ll and lll only
C. l and ll only
u.l and lll only, or ll and lll only
L. Any Lwo of Lhe Lhree
Explanation:
Clearly, any of the three will give us the answer.
COMPOUND
INTEREST
COMPOUND INTEREST
Compound interest is calculated each period on the original principal and all interest
accumulated during past periods. Although the interest may be stated as a yearly rate, the
compounding periods can be yearly, semiannually, quarterly, or even continuously.
IMPORTANT FORMULA
Let Principal = P, Rate = R% per annum, Time = n years.
When interest is compound Annually:
Amount = P 1 +
R
n
100
When interest is compounded Half-yearly:
Amount = P 1 +
(R/2)
2n
100
When interest is compounded Quarterly:
Amount = P 1 +
(R/4)
4n
100
When interest is compounded Annually but time is in fraction, say 3 years.
Amount = P 1 +
R
3x 1 +
R
100 100
When Rates are different for different years, say R
1
%, R
2
%, R
3
% for 1
st
, 2
nd
and 3
rd
year
respectively.
Then, Amount = P 1 +
R
1
1 +
R
2
1 +
R
3
.
100 100 100
Present worth of Rs. x due n years hence is given by:
Present Worth =
x
.
1 +
R
100
SOLVED EXAMPLE
1.
Find compound interest on Rs. 7500 at 4% per annum for 2 years, compounded
annually.
A. Rs.512 B. Rs.552
C. Rs.612 D. Rs.622
Solution
Amount
= Rs[7500x(1+4/100)]
=Rs.(7500x26/25x26/25)
= Rs.8112.
C.I
= Rs(8112 - 7500)
=Rs.612.
2.
Find the compound interest on Rs.16,000 at 20% per annum for 9 months, compounded
quartely.
A. Rs. 2552 B. Rs. 2512
C. Rs. 2572 D. Rs. 2592
Solution
Principal = Rs.16,000;
Time=9 months = 3 quarters;
Amount
=Rs.[16000x(1+5/100)]
=[16000x21/20x21/20x21/20]
= Rs.18522.
C.I
= Rs.(18522 - 16000)
= Rs.2522.
3.
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. The sum placed on simple
interest is
A. Rs. 1550 B. Rs. 1650
C. Rs. 1750 D. Rs. 2000
Solution
C.I. =Rs[4000x(1+10/100)-4000]
Rs.(4000x11/10x11/10-4000) = Rs.940.
Sum
=Rs. [420x100 /3x8]
= Rs.1750.
4.
Albert invested an amount of Rs.8000 in a fixed deposit scheme for 2 years at
compound interest rate 5 p.c.p.a. How much amount will Albert get on maturity
of the fixed deposit ?
A. Rs. 8600
B. Rs.
8620
C. Rs. 8840
D. Rs.
8820
Solution
Amount
=Rs.[8000x(1+5/100)
]
= Rs.
[8000 x 21/20x21/20]
= Rs.8820.
5. The present worth of Rs.169 due in 2 years at 4% per annum compound interest is
A. Rs.150.50 B. Rs.154.75
C. Rs.156.25 D. Rs.158
Solution
Present Worth
= Rs.[169/(1+4/100)]
= Rs.(169x25/26x25/26)
= Rs.156.25
6.
On a sum of money, the simple interest for 2 years is Rs. 660,while the compound
interest is Rs.696.30,the rate of interest being the same in both the cases. The rate of
interest is
A. 10% B. 11%
C. 12% D. 10.5%
Solution
Difference in C.I and S.I for 2 years
= Rs(696.30-660)
=Rs. 36.30.
S.I for one years = Rs330.
S.I on Rs.330 for 1 year =Rs. 36.30
Rate
= (100x36.30/330x1)%
=11%.
7.
The difference between simple interest and compound interest on Rs. 1200 for one
year at 10% per annum reckoned half yearly is
A. Rs.2.50
B.
Rs.
3
C. Rs. 4
D.
Rs.
3.75
Solution
S.I
= Rs.(1200x10x1/100)
Rs.120.
C.I
=Rs[(1200x1+5/100) -1200]
Rs.123.
Difference
= Rs.[123-120]
Rs. 3.
8.
A sum of money invested at compound interest amounts to Rs. 800 in 3 years and to Rs.
840 in 4 years. The rate of interest per annum is
A. 2x1/2% B. 4%
C. 5% D. 6x2/3%
Solution
S.I. on Rs.800 for 1 year
=Rs[840 - 800]
= Rs.40
Rate
=(100x40/800x1)%
= 5%
9.
If the simple interest on a sum of money for 2 years at 5% per annum is Rs. 50, what is
the compound interest on the same at the same rate and for the same time?
A. Rs. 51.25 B. Rs. 52
C. Rs. 54.25 D. Rs. 60
Solution
Sum =Rs.(50 x 100/2x5)
10.
In what time will Rs.1000 become Rs.1331 at 10%
per annum compounded annually?
A. 2 years B. 3 years
C. 4 years D. 7 years
Solution
Principal = Rs.1000;
Amount = Rs.1331;
Rate = Rs.10%p.a.
Let the time be n years.Then
[1000(1+10/100)n;]
= 1331.
= (1331/1000)
= (11/10)
Therefore n = 3 years.
= Rs. 500.
Amount
=[Rs.(500
x(1+5/100)]
=
Rs(500x21/20x21/20).
=Rs. 551.25
C.I
= Rs. (551.25 - 500)
= Rs. 51.25
11.
If the simple interest on a sum of money at 5% per annum for 3 years is Rs. 1200, find
the compound interest on the same sum for the same period at the same rate.
A. 1251 B. 1261
C. 1271 D. 1281
Solution
Clearly, Rate = 5% p.a .,
Time = 3 years
S.I =Rs.1200.
So,Principal
=Rs.(100 x 1200/3x5)
=Rs.8000.
Amount
=Rs.[8000 x (1+5/100)]
=Rs(8000x21/20x21/20x21/20)
= Rs.9261
C.I
=Rs.(9261-8000)
=Rs.1261.
12.
What will be the compound interest on a sum of Rs.25,000 after 3 years at the rate of 12
p.c.p.a?
A. Rs.9000.30 B. Rs. 9720
C. Rs. 10123.20 D. Rs. 10483.20
Solution
Amount
= Rs.(25000x(1+12/100)
=Rs.(25000x28/25x28/25x28/25)
= Rs. 35123.20.
C.I =Rs(35123.20-25000)
=Rs.10123.20.
13.
The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in
years) is
A. 2 B. 2
C. 3 D. 4
Solution
Amount
=Rs(30000 + 4347)
= Rs.34347.
Let the time be n years.
Then, 30000(1+7/100)^n
= 34347.
=34347/3000
=11449/1000
=(107/100)^n
n= 2years.
14. A bank offers S compound |nterest ca|cu|ated on ha|f-year|y bas|s. A customer depos|ts ks. 1600
each on 1
st
Ianuary and 1
st
Iu|y of a year. At the end of the year, the amount he wou|d have ga|ned by
way of |nterest |s:
A.8s. 120 8.8s. 121
C.8s. 122 u.8s. 123
Explanation:
Amount= Rs. 1600 x 1 +
5
2+ 1600 x 1 +
5
2 x 100 2 x 100
= Rs. 1600 x41x41+ 1600 x41
40 40 40
= Rs. 1600 x
41 41
+ 1
40 40
= Rs.
1600 x 41 x 81
40 x 40
= Rs. 3321.
C.I. = Rs. (3321 - 3200) = Rs. 121
1S. 1he d|fference between s|mp|e and compound |nterests compounded annua||y on a certa|n sum of
money for 2 years at 4 per annum |s ke. 1. 1he sum (|n ks.) |s:
A.623 8.630
C.640 u.630
Explanation:
Let the sum be Rs. x. Then,
C.I. = x 1 +
4
2- x =
676
x- x =
51
x.
100 625 625
S.I. =
x x 4 x 2
=
2x
.
100 25
51x
-
2x
= 1
625 25
x = 625
16. 1here |s 60 |ncrease |n an amount |n 6 years at s|mp|e |nterest. What w||| be the compound
|nterest of ks. 12,000 after 3 years at the same rate?
A.8s. 2160 8.8s. 3120
C.8s. 3972 u.8s. 6240
L. none of Lhese
Explanation:
Let P = Rs. 100. Then, S.I. Rs. 60 and T = 6 years.
R =
100 x 60
= 10% p.a.
100 x 6
Now, P = Rs. 12000. T = 3 years and R = 10% p.a.
C.I.= Rs. 12000 x 1 +
10
3- 1
100
= Rs. 12000 x
331
1000
= 3972.
17. What |s the d|fference between the compound |nterests on ks. S000 for 1 years at 4 per
annum compounded year|y and ha|f-year|y?
A.8s. 2.04 8.8s. 3.06
C.8s. 4.80 u.8s. 8.30
Explanation:
C.I. when interest
compounded yearly
= Rs. 5000 x 1 +
4
x 1 +
x 4
100 100
= Rs. 5000 x
26
x
51
25 50
= Rs. 5304.
C.I. when interest is
compounded half-yearly
= Rs. 5000 x 1 +
2
3
100
= Rs. 5000 x
51
x
51
x
51
50 50 50
= Rs. 5306.04
Difference = Rs. (5306.04 - 5304) = Rs. 2.04
18. The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in
years) is:
Explanation:
Amount = Rs. (30000 + 4347) = Rs. 34347.
Let the time be n years.
Then, 30000 1 +
7
n= 34347
100
107
n=
34347
=
11449
=
107
2
100 30000 10000 100
n = 2 years.
19. What w||| be the compound |nterest on a sum of ks. 2S,000 after 3 years at the rate of 12 p.c.p.a.?
A.8s. 9000.30 8.8s. 9720
C.8s. 10123.20 u.8s. 10483.20
L. none of Lhese
Explanation:
Amount= Rs. 25000 x 1 +
12
3
100
= Rs. 25000 x
28
x
28
x
28
25 25 25
= Rs. 35123.20
C.I. = Rs. (35123.20 - 25000) = Rs. 10123.20
20. At what rate of compound |nterest per annum w||| a sum of ks. 1200 become ks. 1348.32 |n 2
years?
A.6 8.6.3
C.7 u.7.3
Explanation:
Let the rate be R% p.a.
Then, 1200 x 1 + R 2= 1348.32
100
1 +
R
2=
134832
=
11236
100 120000 10000
1 +
R
2=
106
2
100 100
1 +
R
=
106
100 100
R = 6%
DATA SUFFICIENCY PROBLEM
Directions to Solve
Each of the questions given below consists of a statement and / or a question and two statements
numbered I and II given below it. You have to decide whether the data provided in the
statement(s) is / are sufficient to answer the given question. Read the both statements and
Give answer (A) if the data in Statement I alone are sufficient to answer the question,
while the data in Statement II alone are not sufficient to answer the question.
Give answer (B) if the data in Statement II alone are sufficient to answer the question,
while the data in Statement I alone are not sufficient to answer the question.
Give answer (C) if the data either in Statement I or in Statement II alone are sufficient to
Give answer (D) if the data even in both Statements I and II together are not sufficient to
Give answer(E) if the data in both Statements I and II together are necessary to answer
the question.
1. What is the rate of compound interest?
I. The principal was invested for 4 years.
II. The earned interest was Rs. 1491.
A.I alone sufficient while II alone not sufficient to answer
B.II alone sufficient while I alone not sufficient to answer
C.Either I or II alone sufficient to answer
D.Both I and II are not sufficient to answer
E. Both I and II are necessary to answer
Explanation:
Let Principal = Rs. P and Rate = R% p.a. Then,
Amount = Rs. P 1 +
R
4
100
C.I. =P 1 +
R
4- 1
100
P 1 +
R
4- 1 = 1491.
100
Clearly, it does not give the answer.
2. What will be compounded amount?
I. Rs. 200 was borrowed for 192 months at 6% compounded annually.
II. Rs. 200 was borrowed for 16 years at 6%.
A.I alone sufficient while II alone not sufficient to answer
B.II alone sufficient while I alone not sufficient to answer
C.Either I or II alone sufficient to answer
D.Both I and II are not sufficient to answer
E. Both I and II are necessary to answ
Explanation:
I. Amount = Rs. 200 x 1 +
6
16
100
II. Amount = Rs. 200 x 1 +
6
16
100
Thus, I as well as II gives the answer.
EXERCISE PROBLEMS
1. 1he |east number of comp|ete years |n wh|ch a sum of money put out at 20 compound |nterest
w||| be more than doub|ed |s:
A.3 8.4
C.3 u.6
Explanation:
P 1 +
20
n> 2P
6
n> 2.
100 5
Now,
6
x
6
x
6
x
6
> 2.
5 5 5 5
So, n = 4 years.
2. A|bert |nvested an amount of ks. 8000 |n a f|xed depos|t scheme for 2 years at compound |nterest
rate S p.c.p.a. now much amount w||| A|bert get on matur|ty of the f|xed depos|t?
A.8s. 8600 8.8s. 8620
C.8s. 8820 u.none of Lhese
Explanation:
Amount= Rs. 8000 x 1 +
5
2
100
= Rs. 8000 x
21
x
21
20 20
= Rs. 8820.
3. 1he effect|ve annua| rate of |nterest correspond|ng to a nom|na| rate of 6 per annum payab|e
ha|f-year|y |s:
A.6.06 8.6.07
C.6.08 u.6.09
Explanation:
Amount of Rs. 100 for 1 year
when compounded half-yearly
= Rs. 100 x 1 +
3
2 = Rs. 106.09
100
Effective rate = (106.09 - 100)% = 6.09%
4. S|mp|e |nterest on a certa|n sum of money for 3 years at 8 per annum |s ha|f the compound
|nterest on ks. 4000 for 2 years at 10 per annum. 1he sum p|aced on s|mp|e |nterest |s:
A.8s. 1330 8.8s. 1630
C.8s. 1730 u.8s. 2000
Explanation:
C.I.= Rs. 4000 x 1 +
10
2- 4000
100
= Rs. 4000 x
11
x
11
- 4000
10 10
= Rs. 840.
Sum = Rs.
420 x 100
= Rs. 1750.
3 x 8
S. If the s|mp|e |nterest on a sum of money for 2 years at S per annum |s ks. S0, what |s the
compound |nterest on the same at the same rate and for the same t|me?
A.8s. 31.23 8.8s. 32
C.8s. 34.23 u.8s. 60
Explanation:
Sum = Rs.
50 x 100
= Rs. 500.
2 x 5
Amount= Rs. 500 x 1 +
5
2
100
= Rs. 500 x
21
x
21
20 20
= Rs. 551.25
C.I. = Rs. (551.25 - 500) = Rs. 51.25
6.1he d|fference between s|mp|e |nterest and compound on ks. 1200 for one year at 10 per annum
reckoned ha|f-year|y |s:
A.8s. 2.30 8.8s. 3
C.8s. 3.73 u.8s. 4
L. none of Lhese
Explanation:
S.I. = Rs
1200 x 10 x 1
= Rs. 120.
100
C.I. = Rs. 1200 x 1 +
5
2- 1200 = Rs. 123.
100
Difference = Rs. (123 - 120) = Rs. 3.
7. 1he d|fference between compound |nterest and s|mp|e |nterest on an amount of ks. 1S,000 for 2
years |s ks. 96. What |s the rate of |nterest per annum?
A.8 8.10
C.12 u.CannoL be deLermlned
L. none of Lhese
Explanation:
15000 x 1 +
R
2- 15000 -
15000 x R x 2
= 96
100 100
=15000 1 +
R
2- 1 -
2R
= 96
100 100
15000
(100 + R)
2
- 10000 - (200 x R)
= 96
10000
R
2
=
96 x 2
= 64
3
R = 8.
Rate = 8%.
8. 1he compound |nterest on a certa|n sum for 2 years at 10 per annum |s ks. S2S. 1he s|mp|e
|nterest on the same sum for doub|e the t|me at ha|f the rate percent per annum |s:
A.8s. 400 8.8s. 300
C.8s. 600 u.8s. 800
Explanation:
Let the sum be Rs. P.
Then, P 1 +
10
2- P = 525
100
P
11
2- 1 = 525
10
P =
525 x 100
= 2500.
21
Sum = Rs . 2500.
So, S.I. = Rs.
2500 x 5 x 4
= Rs. 500
100
9. What will Rs.1500 amount to in three years if it is invested in 20% p.a. compound
interest, interest being compounded annually?
(A) 2400 (B) 2592 (C) 2678 (D) 2540
Solution:
The usual way to find the compound interest is given by the formula A = .
In this formula, A is the amount at the end of the period of investment
P is the principal that is invested
r is the rate of interest in % p.a
And n is the number of years for which the principal has been invested.
In this case, it would turn out to be A =
= 2592.
10. If a sum of money grows to 144/121 times when invested for two years in a scheme
where interest is compounded annually, how long will the same sum of money take to treble
if invested at the same rate of interest in a scheme where interest is computed using simple
interest method?
(A) 9 years (B) 22 years (C) 18 years (D) 33 years
Solution
The sum of money grows to times in 2 years.
If P is the principal invested, then it has grown to P in two years when invested in compound
interest.
In compound interest, if a sum is invested for two years, the amount is found using the following
formula
= P in this case.
=> => => =>
If r = , then in simple interest the time it will take for a sum of money to treble is found out
as follows:
Let P be the principal invested. Therefore, if the principal trebles = 3P, the remaining 2P has
come on account of simple interest.
Simple Interest = , where P is the simple interest, r is the rate of interest and n is the
number of years the principal was invested.
Therefore, 2P = => 2 = or n = 22 years.
11.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) 6400 (C) 7200 (D) 9600
Solution:
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
The rate of growth during the next three years will also be the same.
Therefore, the population will grow from 4800 by = 1600
Hence, the population three years from now will be 4800 + 1600 = 6400
12. A man invests Rs.5000 for 3 years at 5% p.a. compound interest reckoned yearly.
Income tax at the rate of 20% on the interest earned is deducted at the end of each year.
Find the amount at the end of the third year.
(A) 5624.32 (B) 5630.50 (C) 5788.125 (D) 5627.20
Solution:
5% is the rate of interest. 20% of the interest amount is paid as tax. That is 80% of the interest
amount stays back. Therefore, if we compute the rate of interest as 80% of 5% = 4% p.a., we will
get the same value.
The interest accrued for 3 years in compound interest = 3*simple interest on principal +
3*interest on simple interest + 1*interest on interest on interest. = 3*(200) + 3*(8) + 1*0.32 =
600 + 24 + 0.32 = 624.32
The amount at the end of 3 years = 5000 + 624.32 = 5624.32
13. The difference between the compound interest and the simple interest on a certain sum
at 12% p.a. for two years is Rs.90. What will be the value of the amount at the end of 3
years?
(A) 9000 (B) 6250 (C) 8530.80 (D) 8780.80
Solution:
, when interest is reckoned using compound interest, interest being compounded annually. The
difference in the simple interest and compound interest for two years is on account of the interest
paid on the first year's interest
Hence 12% of simple interest = 90 => simple interest = =750.
As the simple interest for a year = 750 @ 12% p.a., the principal = = Rs.6250.
If the principal is 6250, then the amount outstanding at the end of 3 years = 6250 + 3(simple
interest on 6250) + 3 (interest on simple interest) + 1 (interest on interest on interest) = 6250 +
3(750) + 3(90) + 1(10.80) = 8780.80.
14. Rs. 5887 is divided between Shyam and Ram, such that Shyam's share at the end of 9
years is equal to Ram's share at the end of 11 years, compounded annually at the rate of
5%. Find the share of Shyam.
(A) 2088 (B) 2000
(C) 3087 (D) None of these
Solution:
Shyam's share * (1+0.05)
9
= Ram's share * (1 + 0.05)
11
Shyam's share / Ram's share = (1 + 0.05)
11
/ (1+ 0.05)
9
= (1+ 0.05)
2
= 441/400
Therefore Shyam's share = (441/841) * 5887 = 3087.
1S. The question for the day is from the topic simple and compound interest. Shawn
invested one half of his savings in a bond that paid simple interest for 2 years and received
Rs.550 as interest. He invested the remaining in a bond that paid compound interest,
interest being compounded annually, for the same 2 years at the same rate of interest and
received Rs.605 as interest. What was the value of his total savings before investing in these
two bonds?
(A) Rs.5500 (B) Rs.11000
(C) Rs.22000 (D) Rs.2750
Solution:
Shawn received an extra amount of (Rs.605 Rs.550) Rs.55 on his compound interest paying
bond as the interest that he received in the first year also earned interest in the second year.
The extra interest earned on the compound interest bond = Rs.55
The interest for the first year = = Rs.275
Therefore, the rate of interest = = 20% p.a.
20% interest means that Shawn received 20% of the amount he invested in the bonds as interest.
If 20% of his investment in one of the bonds = Rs.275, then his total investment in each of the
bonds = = 1375.
As he invested equal sums in both the bonds, his total savings before investing = 2*1375 =
Rs.2750.
16. Rs.100 doubled in 5 years when compounded annually. How many more years will it
take to get another Rs.200 compound interest?
(A)10 years (B) 5 years (C) 7.5 years (D) 15 years (E) 8 years
Solution
Rs.100 invested in compound interest becomes Rs.200 in 5 years.
The amount will double again in another 5 years.
i.e., the amount will become Rs.400 in another 5 years.
So, to earn another Rs.200 interest, it will take another 5 years.
17. Find the effective rate of interest for an investment that earns 51
2% per year, compounded continuously.
Solution:
We are not given a value of P in this problem, so either pick a value
for P and stick with that throughout the problem, or just let P = P.
We have that t = 1, and r = .055. To find the effective rate of interest,
first find out how much money we have after one year:
A = Pert
A = Pe(.055)(1)
A = 1.056541P.
Therefore, after 1 year, whatever the principal was, we now have 1.056541P.
Next, find out how much interest was earned, I, by subtracting the ini-
tial amount of money from the final amount:
I = A P
= 1.056541P P
= .056541P.
Finally, to find the effective rate of interest, use the simple interest
formula, I = Prt. So,
I = Pr(1) = .056541P
.056541 = r.
Therefore, the effective rate of interest is 5.65%.
DATA SUFFICIENCY PROBLEM
1. An amount of money was lent for 3 years. What will be the difference between the simple
and the compound interest earned on it at the same rate?
I. The rate of interest was 8 p.c.p.a.
II. The total amount of simple interest was Rs. 1200.
A.l alone sufflclenL whlle ll alone noL sufflclenL Lo answer
8.ll alone sufflclenL whlle l alone noL sufflclenL Lo answer
C. LlLher l or ll alone sufflclenL Lo answer
u.8oLh l and ll are noL sufflclenL Lo answer
L. 8oLh l and ll are necessary Lo answer
Explanation:
Given: T = 3 years.
I. gives: R = 8% p.a.
II. gives: S.I. = Rs. 1200.
Thus, P = Rs. 5000, R = 8% p.a. and T = 3 years.
Difference between C.I. and S.I. may be obtained.
So, the correct answer is (E).
2.What will be the compound interest earned on an amount of Rs. 5000 in 2 years?
I. The simple interest on the same amount at the same rate of interest in 5 years is Rs.
2000.
II. The compound interest and the simple interest earned in one year is the same.
III. The amount becomed more than double on compound interest in 10 years.
A.l only
8.l and ll only
C. ll and lll only
u.l and lll only
L. none of Lhese
Explanation:
P = Rs. 5000 & T = 2 years.
I. S.I. on Rs. 5000 in 5 years is Rs. 2000.
5000 x R x 5
= 2000 R = 8.
100
Thus I only gives the answer.
3.What is the rate of interest p.c.p.a.?
I. An amount doubles itself in 5 years on simple interest.
II. Difference between the compound interest and the simple interest earned on a certain
amount in 2 years is Rs. 400.
III. Simple interest earned per annum is Rs. 2000.
A.l only
8.ll and lll only
C. All l, ll and lll
u.Any Lwo of Lhe Lhree
L. l only or ll and lll only
Explanation:
I.
P x R x 5
= P R = 20.
100
II. P 1 +
R
2- P -
P x R x 2
= 400 PR
2
= 4000000.
100 100
III.
P x R x 1
= 2000 PR = 200000.
100
PR
2
=
4000000
R = 20.
PR 200000
Thus I only or (II and III) give answer.
4. Mr. Gupta borrowed a sum of money on compound interest. What will be the amount to
be repaid if he is repaying the entire amount at the end of 2 years?
I. The rate of interest is 5 p.c.p.a.
II. Simple interest fetched on the same amount in one year is Rs. 600.
III. The amount borrowed is 10 times the simple interest in 2 years.
A.
I only
8.
III only
C.
I or II only
u.
II and Either I or III only
L.
All I, II and III are required
Explanation:
I. gives, Rate = 5% p.a.
II. gives, S.I. for 1 year = Rs. 600.
III. gives, sum = 10 x (S.I. for 2 years).
Now I, and II give the sum.
For this sum, C.I. and hence amount can be obtained.
Thus, III is redundant.
Again, II gives S.I. for 2 years = Rs. (600 x 2) = Rs. 1200.
Now, from III, Sum = Rs. (10 x 1200) = Rs . 12000.
Thus, Rate =
100 x 1200
= 5% p.a.
2 x 12000
Thus, C.I. for 2 years and therefore, amount can be obtained.
Thus, I is redundant.
Hence, I or III redundant.
5.What is the compound interest earned at the end of 3 years?
I. Simple interest earned on that amount at the same rate and for the same period is
Rs. 4500.
II. The rate of interest is 10 p.c.p.a.
III. Compound interest for 3 years is more than the simple interest for that period by Rs.
465.
A.I and II only
B.II and III only
C.I and III only
D.Either II or III only
E. Any two of the three