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World of Online
Coaching
Today’s Topic
Simple & Compound Interest
 Topics to be covered
 Introduction to Simple Interest & Basic examples
 Frequently asked examples of SI
 Introduction to Compound Interest & basic Examples
 Frequently asked examples of CI
 Compound growth of Population & bacteria
 Practice Examples
 Introduction to SI
• Normally when Money is lent or borrowed, the interest comes into
picture depending upon amount of money, period for which lent
or borrowed and Rate of interest decided.
• So as we all know that
𝑷 ∗𝑹 ∗𝑻
• SI = where, P = Principal
𝟏𝟎𝟎
R = Rate of Interest in % (usually per Annum)
T = Time In Number of Years (as rate % is p.a)
 Principal sometimes also called “A Sum of money”
 Time is to be taken according to Rate of interest(per annum or per
month / per day)
 Amount = Principal + Interest
 Note: In Simple interest, principal, on which the interest is to be
found does not change.
 Basic Examples
Que: Find SI on the principal of ₹ 90000 at 15% per annum for 4 years.
𝟗𝟎𝟎𝟎𝟎 ∗𝟏𝟓 ∗𝟒
Sol: SI = = ₹54000  Ans = ₹ 54000.
𝟏𝟎𝟎

𝟐
Que: Find Amount for Principal of ₹ 68000 at 16 % per annum for 9
𝟑
months.
𝟔𝟖𝟎𝟎𝟎 ∗𝟓𝟎 ∗𝟗
Sol: SI = = 8500  now, Amount = P + I so,
𝟏𝟎𝟎 ∗𝟑 ∗𝟏𝟐
Amount = 68000 + 8500 = Ans = ₹ 76500.

Que: if I invested ₹ 1,50,000 for 3 years at Simple interest & I received

amount of ₹ 2,25,000 then what was rate of interest in % p.a?
Sol: SI = Amount – Principal  2,25,000 – 1,50,000 = ₹ 75000
𝑷 ∗𝑹 ∗𝑻 𝟏,𝟓𝟎,𝟎𝟎𝟎 ∗𝑿 ∗𝟑 𝟐
So, SI =  75000 =  X = 16 % p.a.
𝟏𝟎𝟎 𝟏𝟎𝟎 𝟑
 Frequently asked Examples
Que: At what rate per annum will a sum of money get double in 16
years at Simple Interest?
Sol: for money to get doubled we have to get interest equal to
principal. So, SI = P
𝑷 ∗𝑹 ∗𝑻 𝑺𝑰 ∗𝑹 ∗𝟏𝟔
SI =  SI =  R = 6.25%
𝟏𝟎𝟎 𝟏𝟎𝟎

A quick Que: Suppose If money gets doubled in 10 years at SI at

certain rate of interest then in what time it will get 8 times?
+10 years +10 years
Some 10 years = Total 30
Op. A Money
Double Four times Eight Times Years

10 years +10 years +10 years +10 years Eight

Op. BSome Double Four times Six Times Times
Money
= Total 40
Years

Which option is correct?? Op. A or Op. B?

…Conti
Neither A nor B is correct
 Now we will try to find by calculating it as an example.
Que: Suppose If money gets doubled in 10 years at SI at certain rate of
interest then in what time it will get 8 times?
Sol: money gets doubled in 10 years , so SI = P in 10 years
𝑷 ∗𝑹 ∗𝟏𝟎
: SI = P = R = 10% P.a.
𝟏𝟎𝟎
Now for money to get 8 times SI = 7P
𝑷 ∗𝟏𝟎 ∗ 𝑿
So : 7P =  X = 70 Years, SO Correct Ans is 70 Years.
𝟏𝟎𝟎
Why? Because Simple Interest is Linear growth, not exponential.
+10 years +10 years +10 years Five
Some 10 years Double three times Four Times Times
Money

+10 years

Total 70 = Eight +10 years Seven +10 years Six

Years Times Times Times
 Frequently asked Examples
Que: Sachin invests an amount of ₹ 24200 at the rate 4% p.a. for 6
years on SI and later he invests the received amount for another 4
years at 4% p.a of SI. What interest will he receive at the end of last 4
years?
Options: A. ₹ 1393.92 B. ₹ 4801.28 C. ₹ 4800 D. 4700
Sol:
𝟒∗𝟔 𝟒
SI after last 4 years = 𝟐𝟒𝟐𝟎𝟎 𝟏 + ∗𝟒 ∗
𝟏𝟎𝟎 𝟏𝟎𝟎
Ans = 𝟒𝟖𝟎𝟏. 𝟐𝟖
 Frequently asked Examples
𝟏
Que: A sum of money at S.I at 13 % p.a. amounts to ₹ 2502.50 after 4
𝟐
years. Find principal.
Sol:
𝑷 ∗𝟐𝟕 ∗𝟒 𝟐𝟕∗𝑷
SI = =
𝟏𝟎𝟎 ∗𝟐 𝟓𝟎
𝟐𝟕∗𝑷
A = P + SI  2502.50 = P + , Solving we get
𝟓𝟎
P = ₹ 1625
 Frequently asked Examples
Que: A Certain sum amounts to ₹1008 in 2 years & ₹1164 in 3.5 Years.
Find the sum & rate of interest.
Sol:
Amount after 2 years = 1008 Difference is interest in 1.5 Years
 1164 – 1008 = ₹156
Amount after 3.5 years = 1164
So as we know in Simple interest , interest remains same for each year,

1.5 – 156
2 - ?  Interest for 2 Years = ₹ 208.

So after 2 years if amount = 1008 & SI = 208, then P = 1008 – 208

 Ans: principal = ₹ 800.
Now for Rate of interest,
𝟖𝟎𝟎 ∗𝑹 ∗𝟐
208 =  R = 13%
𝟏𝟎𝟎
 Frequently asked Examples
Que: The SI on a sum of money is 4/9 of the principal. Find the Time
for which money was invested if rate % p.a and time are numerically
equal.
Option: A. 6 Y & 3 M B. 6 Y & 6 M C. 6 Y & 6.6 M D. 6 Y & 8 M
Sol:
𝟒 𝑷 ∗𝑹 ∗𝑵 𝟒 𝑷 ∗𝑵 ∗𝑵 𝟐𝟎
*P=  as R = N  *P= N= years
𝟗 𝟏𝟎𝟎 𝟗 𝟏𝟎𝟎 𝟑
Ans: 6 years and 8 months
 Frequently asked Examples
Que: Anil and Mukesh invested some money at 6% & 7% per annum
respectively of SI. At the end of 2 years they found that together they
received ₹ 354 as interest. One fourth of Anil’s initial investment is
equal to one fifth of money invested by Mukesh. Find total money
invested.
Options: A. ₹ 2746.5 B. ₹ 2600 C. ₹ 2700 D. ₹ 2880
Sol:
 SI from Anil + SI from Mukesh = 354
𝑷𝑨∗𝟔∗𝟐 𝑷𝑴 ∗𝟕 ∗𝟐
 + = 𝟑𝟓𝟒
𝟏𝟎𝟎 𝟏𝟎𝟎
𝟏 𝟏
 Now as we know that 𝑷 = 𝑷𝑴
𝟒 𝑨 𝟓
𝟓
𝑷𝑨∗𝟔∗𝟐 𝑷 ∗𝟕 ∗𝟐
 + 𝟒 𝑨
= 𝟑𝟓𝟒 ⇒ 𝑷𝑨 = 𝟏𝟐𝟎𝟎 & 𝒉𝒆𝒏𝒄𝒆 𝑷𝑴 = 𝟏𝟓𝟎𝟎
𝟏𝟎𝟎 𝟏𝟎𝟎
 Ans = 2700
 Frequently asked Examples
Que: Adam borrowed some money on SI at the rate of 6% p.a. for the
first two years, at the rate of 9% p.a. for the next three years, and at
the rate of 14% p.a. for the period beyond 5 years. If he pays a total
interest of ₹ 11400 at the end of nine years, how much money did he
borrow?
Options: A. ₹ 10458.71 B. ₹ 12000 C. ₹ 12500 D. None
Sol:
𝑷∗𝑹 ∗𝑻
 SI =
𝟏𝟎𝟎
𝑷 ∗𝟔 ∗𝟐 𝑷 ∗𝟗 ∗𝟑 𝑷 ∗𝟏𝟒 ∗𝟒
 11400 = + +
𝟏𝟎𝟎 𝟏𝟎𝟎 𝟏𝟎𝟎
 𝟏𝟏𝟒𝟎𝟎 ∗ 𝟏𝟎𝟎 = 𝑷 𝟏𝟐 + 𝟐𝟕 + 𝟓𝟔
𝟏𝟎𝟎
 𝑷 = 𝟏𝟏𝟒𝟎𝟎 ∗
𝟗𝟓
 Ans  P = ₹ 12000
 Frequently asked Examples
Que: The company policy states that for a loan of simple interest for 2
years the rate of interest is 20%. A new employee didn’t know this
and negotiated with a customer for 18% loan. What is % reduction in
earnings of company.
Option: A. 2% B. 20% C. 4% D.10%
Sol: Suppose a loan of ₹ 1000, then
as per policy 20% of ₹1000 each year for 2 years  ₹200 + ₹ 200 = ₹400
₹400 Could have been the earnings of the company. But,
As per 18% of ₹1000 each year for 2 years  ₹180 + ₹ 180 = ₹ 360
So reduction of earning is 400 – 360 = ₹40, over ₹ 400
𝟒𝟎
So % reduction = ∗ 𝟏𝟎𝟎 = 𝟏𝟎% reduction
𝟒𝟎𝟎
 Introduction to Compound Interest
Suppose P = ₹ 10000, Rate = 10% p.a.

Simple Interest Compound Interest

1st Year: SI = 10% of ₹10000 = ₹ 1000 CI = 10% of ₹10000 = ₹ 1000

Compounding Process
Old Principal + Interest = New Principal
₹ 10000 + ₹ 1000 = ₹ 11000
2nd Year: SI = 10% of ₹10000 = ₹ 1000 CI = 10% of ₹11000 = ₹ 1100
Compounding Process
Old Principal + Interest = New Principal
₹ 11000 + ₹ 1100 = ₹ 12100
3rd Year: SI = 10% of ₹10000 = ₹ 1000 CI = 10% of ₹12100 = ₹ 1210
So as seen above, due to compounding process, in CI, Principal changes
each year & hence compound interest also increases each year.
 So basically Compound Interest is nothing but Simple Interest with
changing principal each year in above Ex.
Observation: Difference of CI &SI after 2 years is ₹2100 - ₹ 2000 = ₹100, which
is nothing but interest of first year’s interest. i.e. 10% of ₹ 1000 = ₹ 100.
 Introduction to Compound Interest
𝑅 t
Amount = Principal (1 + ) , R = Rate of Interest % p.a
100
Multiplication Factor 𝑡 = No. of years as R is % p.a
**The above formula is when compounded annually,
General formula is
𝑹
Amount = Principal (𝟏 + )𝒏 ∗ 𝒕 ,
𝟏𝟎𝟎 ∗𝒏
R = Rate in % p.a.
n = No. of times compounding is done in a year
T = no of years
𝑹
1) Compounded semi annually A = P (𝟏 + )𝟐 ∗ 𝒕
𝟏𝟎𝟎 ∗𝟐
𝑹
2) Compounded Quarterly  A = P (𝟏 + )𝟒 ∗ 𝒕
𝟏𝟎𝟎 ∗ 𝟒
 For different rates of interests for different years
𝑹𝟏 𝑹𝟐 𝑹𝟑
A = P (𝟏 + ) (𝟏 + ) (𝟏 + )
𝟏𝟎𝟎 𝟏𝟎𝟎 𝟏𝟎𝟎
 Basic Examples
Que: Find Amount on the principal of ₹ 50000 at 10% p.a. CI for 3
years.
10 3
Sol: A = 50000 (1 + ) = 50000 1.1 3 = Ans: ₹66550
100
Que: Find CI on Principal of ₹ 1,00,000 at 10% p.a. for 1.5 years
compounded semi annually.
10
Sol: A = 100000 (1 + )2∗1.5 = 100000 1.05 3 = ₹ 1,15,762.5
100 ∗2
CI = A – P  CI = 1,15,762.5 – 1,00,000 = ₹ 15,762.5

Que: Find CI on P = 16000, R = 20% p.a. for 9 months, compounded

quarterly.
20
Sol: A = 16000 (1 + )4 ∗ 9/12 = ₹ 18522.
100 ∗ 4
CI = A – P  18522 – 16000 = Ans: ₹ 2522
 Frequently asked Example
Que: The difference between CI & SI after 2 years at 10% p.a. on the
same principal is ₹230 then find Principal.
Sol: Method 1:
𝟏𝟎 𝟐 𝑷 ∗𝟏𝟎 ∗𝟐
Diff of CI and SI = [P (𝟏 + ) - P] -  solving this we get
𝟏𝟎𝟎 𝟏𝟎𝟎
P = ₹ 23000
Method 2: Difference between CI and SI after two years is interest on
1st year’s interest. So accordingly
So ₹ 230 is 10% of 1st year’s interest  1st year’s interest is ₹ 2300
Now 1st year’s interest is 10% of Principal Ans: P = ₹ 23000
Method 3: Short cut:
𝑷 ∗ 𝑹²
Difference between CI and SI after 2 years =
𝟏𝟎𝟎2
𝑷 ∗ 𝟏𝟎²
So in our example  ₹ 230 =  P = 230 * 100 = Ans = ₹ 23000
𝟏𝟎𝟎2
𝑷 ∗ 𝑹2 ∗ (𝟑𝟎𝟎+𝑹)
**Difference between CI and SI after 3 years =
𝟏𝟎𝟎𝟑
 Frequently asked Example
Que: A sum of money doubles itself in 15 years at CI, in how many
years it will become eight times?
Sol: if Principal = P money gets doubled  Amount becomes  2P,
𝑅 15
2P = P (1 + ) --- This is given, or we can write
100
𝟏
𝑅 1
𝟐 𝟏𝟓 = (1 + ) ------ Eq. 1
100
Now we need to find the time to get it 8 times so,
𝑅 n
8P = P (1 + )  here we need to find n?
100
𝑅 n
𝟐𝟑 = (1 + )
100
1 𝑛
𝒏
𝟑
𝟐 = 215  = 3  Ans: n= 45
𝟏𝟓
Other way of thinking: As it is compound interest, we know it’s
exponential rise. So,
Double in 15 years  Four times in 30 years  Eight times in 45 years
 Frequently asked Example
Que: A certain Sum amounts to ₹ 7350 in 2 years and ₹ 8575 in 3 years
at CI, then find Sum and Rate of interest.
Sol: One way of thinking:
As given, interest earned between 2nd & 3rd year is difference of
amounts ₹8575 - ₹7350 = ₹1225, which is R% of ₹7350 (amount after 2
years), if rate of interest is R%. So Que is  what % of 7350 is 1225?
𝟏𝟐𝟐𝟓 𝟐
* 100 = 16 %
𝟕𝟑𝟓𝟎 𝟑

Other way of thinking:

As we already know CI is nothing but SI with new principal each year.
𝑷 ∗𝑹 ∗𝑵 𝟕𝟑𝟓𝟎 ∗𝑹 ∗𝟏 𝟐
So, consider SI =  1225 =  R = 16 %
𝟏𝟎𝟎 𝟏𝟎𝟎 𝟑
Now for Principal,
𝟐
𝟏𝟔
7350 = P (𝟏 + 𝟑
)𝟐  P = ₹ 5400
𝟏𝟎𝟎
 Frequently asked Example
Que:A sum of money amounts to ₹ 6690 in 3 years and ₹ 10,035 in 6
years on CI then find Principal.
Sol: As given,
𝑹 𝟑
6690 = P (𝟏 + ) -------------- EQ. 1
𝟏𝟎𝟎
𝑹 𝟔
10035 = P (𝟏 + ) ---------- EQ. 2
𝟏𝟎𝟎

Divide Eq. 2 by Eq. 1,

𝟏𝟎𝟎𝟑𝟓 𝑹 𝟔 𝑹 𝟑 𝟑 𝑹 𝟑
= P(𝟏 + ) /P (𝟏 + )  = (𝟏 + )
𝟔𝟔𝟗𝟎 𝟏𝟎𝟎 𝟏𝟎𝟎 𝟐 𝟏𝟎𝟎
𝑹 𝟑 𝟔𝟔𝟗𝟎 𝟔𝟔𝟗𝟎 𝟑
From EQ. 1 we can put (𝟏 + ) =  =
𝟏𝟎𝟎 𝑷 𝑷 𝟐
So, P = ₹ 4460
 Fun Example
Que: Find rate of interest p.a for compound interest, compounded
daily if we want

𝟐𝟓 𝟏
𝑹 𝑹 𝑹
 2P = P (𝟏 + )𝟑𝟔𝟓∗𝒕  2P = P (𝟏 + )𝟑𝟔𝟓∗𝟑𝟔𝟓
𝟐 𝟐𝟓 = 1+
𝟏𝟎𝟎 ∗𝟑𝟔𝟓 𝟏𝟎𝟎 ∗𝟑𝟔𝟓 𝟏𝟎𝟎 ∗𝟑𝟔𝟓
 R = 1026.15%
 Frequently asked Example
Que: Krishna borrows Rs. 45000 from a bank at 10% compound interest. He
repays it in three annual instalments that are in arithmetic progression. He
ends up paying 54K totally. How much did he pay in his first instalment?
Options: A. 16500 B. 19500 C.21,000 D.18000
Sol:
Let the repayments be "a – d", "a" and "a + d“
a – d + a + a + d = 54000 3a = 54000  a = 18000
 The payment at the end of year 2 is Rs. 18,000.
 As Borrowed amount = Rs. 45,000
Amount outstanding after 1 Year = (45000 × 1.1) – (18000 – d)
31500 + d
Amount outstanding after 2 years = ((31500 + d) * 1.1) – 18000
16650 + 1.1d
Amount outstanding at the end of Year 3 = ((16650 + 1.1d) * 1.1)
18000 + d
18315 + 1.21d = 18000 + d  0.21d = – 315  d = –1500
The payments are Rs. 19500, Rs. 18000 and Rs. 16500
Ans = ₹ 19500
 Frequently asked Example
Que: Ram deposits Rs. P with a bank at r% compound interest and
sees it reach Rs.16P in 8 years. If he had invested the same amount at
r% simple interest for 8 years, what would be the amount?
Options: A. Between 3P and 3.5P B. Between 3.5P and 4P
C. Between 4P and 4.5P D. None
Sol:
 P (1 + r)8 = 16P  (1 + r)8 = 16  ((1 + r)2)4 = 𝟐𝟒
 (1 + r)2= 2  Approximate values of r = 41%
 If he had invested this in simple interest,
A = P + P * 8 *(41)/100 = Approximately 4.312P
 Ans = Between 4P to 4.5P
 Compound Growth of Population
Que: There are equal males and females, 30000 each, in a town at
the start of the year 2000, now During the year 2000 & 2001, male
population increases @20% every year, where as female population
increases @ 10% every six months. Find Difference between total
females and males at the end of the year 2001.
Sol:
𝟐𝟎 𝟐
Male Population: 30000(𝟏 + )  30000 𝟏. 𝟐 𝟐 = 30000*1.44 = 43,200
𝟏𝟎𝟎
𝟏𝟎 𝟒
Female Population: 30000 (𝟏 + )  30000 𝟏. 𝟏 𝟒 = 43923
𝟏𝟎𝟎

Difference = 43923 – 43200 = Ans: 723

 Practice Examples
Que: ₹ 2189 is divided into three parts such that their amounts after 1,
2, 3 years respectively may be equal. If the rate of simple interest
being 4% p.a. in all cases, the smallest part is approximately ______.
A. ₹ 389 B. ₹ 756 C. ₹703 D. ₹352
Sol: Lets assume those 3 parts as a, b, & c respectively then
As per simple interest, Amount after
𝒂 ∗𝟒 ∗𝟏
1 year = 1.04 a --EQ. 1 (A = a +  1.04 a )
𝟏𝟎𝟎
𝒃 ∗𝟒 ∗𝟐
2 years = 1.08 b --EQ. 2 (A = b +  1.08 b )
𝟏𝟎𝟎
𝒄 ∗𝟒 ∗𝟑
3 years = 1.12 c --EQ. 3 (A = c +  1.12 c )
𝟏𝟎𝟎
Also we know that
a + b + c = 2189 --EQ. 4
Solving all above
Smallest we get is c = ₹ 703
 Practice Examples
Que: Saina decides to invest a certain amount of money in savings
account that pays 20% CI p.a. for 2 years. What is sum of money that
she should invest so that he can withdraw ₹ 200 at the end of 1st year
and ₹ 400 at the end of second year?
𝟏𝟒𝟎𝟎 𝟒𝟎𝟎𝟎
Options: A. ₹ 500 B. ₹ C. ₹ D. none
𝟑 𝟗

Sol: lets suppose money invested by Saina was C, then

After first year A = 1.2 * C
And also after she will withdraw ₹ 200, so amount left = 1.2 * C – 200
Now at the end of second year A = 1.2 * (1.2 * C – 200)
Which is nothing but ₹ 400 as given
So simple equation to solve  ₹ 400 = 1.2 * (1.2 * C – 200)
𝟒𝟎𝟎𝟎
Solving we get Ans: ₹
𝟗
 Doubts?
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