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SIMPLE AND COMPOUND INTEREST

* Interest is the additional money paid for the usage of a certain amount.

* The amount borrowed is called the principal.

* The sum of interest and principal is called the amount.

Simple Interest

      If the interest is calculated on same amount of money it is called the simple interest (S.I.).

     Simple Interest will be the same for all the years.

     If P is the principal, R is the rate of interest, T is time and S.I. the simple interest, then

                       

Note: Simple interest is always calculated on principal. Therefore simple interest is equal for every period.

e.g:

1. What would be the simple interest obtained on an a amount of Rs. 6850 at the rate of 6 p.c.p.a. after 3 years?

(A) Rs. 2423     (B) Rs. 1233          (C) Rs. 1633     (D) Rs. 1525    (E) None of these

Sol: Here P = Rs. 6850,     T= 3 years and     R = 6%

           
                 
          Hence answer is (B)

 

2. How long will it take for Rs. 1250 to become Rs. 1600 at 7% per annum simple interest?

       (A) 5 years            (B) 3 years          (C) 4 years         (D) 6 years     (E) None of these

Sol:       

              

                Hence Answer is (C)    

 

3. What would be the amount on Rs. 8250 for 4 years at 15% per annum simple interest?

     (A) Rs. 13200    (B) Rs. 12300        (C) Rs. 10450        (D) Rs. 11200   (E) None of these

SOl:    

           

Shortcut: for one year, rate of interest is 15% and for 4 years it is 15×4 = 60% The Amount will become 160% If 100% Money = 8250,

           

Compound Interest:

    Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.

    If A is the amount, C.I. is the compound interest, P is the principal, R is the rate, and T is the time, then 

         

e.g: What is the compound interest accrued on an amount of Rs. 8000, at the rate of 6% p.a. at the end of 2 years?

      (A) Rs.2545      (B) Rs.2,257.20         (C) Rs.2986   (D) Rs.2775.40    (E) None of these

Sol:      

                

Shortcut:  Amount = 106% of 106% 8000 =  8988.80

                       ∴  C.I. = 8988.80 - 8000 = Rs. 988.80

Note: 1. If the interest is paid half yearly, time is doubled and the rate is halved.

           2. If the interest is paid quarterly, time becomes 4 times and the rate becomes onefourth

e.g: What is the interest accrued on Rs.12000 for one and half year at 4% p.a. compounded half yearly?

       

Difference between Simple and Compound Interest

     Difference between Simple Interest and Compound Interest can be calculated by using formulae.

     There is no difference between Simple and Compound Interest for one year. For 2 years

        

          

e.g: 1. What is the difference between Simple and Compound Interest for two years on Rs. 24000 at 7% rate?

Sol:     
                
                   = Rs. 117.60

 

2. On what sum does the difference between Simple and Compound Interest for 3 years at 5% rate will be Rs. 244?

Sol:  

   

Some other Models of Questions:

 

1. A sum of money will become Rs. 8060 in 4 years at 6% per annum simple interest. Find the sum.

Sol:   

   

Shortcut: For one year, rate of interest is 6% and for 4 years it is 4 × 6% = 24% Then the amount will become 124% If 124% money is Rs. 8060, 100% money will be  × 8060 = Rs. 6500

 

2. Find the simple interest on Rs. 17500 at 7% per annum from August 5th to October 17th in the same year.

Sol: Time from August 5th to October 17th 
                                        =  26 days of August + 30 days of September and 17 days of October

                                

 

3. A sum was put at simple interest at a certain rate for 2 years. Had it been put at 3% higher rate, it would have fetched Rs. 72 more. What is that sum?

Sol: Interest for 2 years is Rs. 72. For one year it is Rs. 36

3% interest money is Rs. 72, then 100% money  × 36 = Rs. 1200
                                                    ∴ Sum is Rs. 1200

 

4. A certain sum of money invested at compound interest doubles in 3 years. In how many years will it become 6 times itself?

Sol: Let the money be Rs. x It becomes Rs. 2x in 3 years As this is compound interest, 2x will be the principal for next period. Therefore, 2x will become 4x in next 3 years hence Rs. x will become 4x

       i.e. 4 times in 3 + 3 = 6 years

 

5. A man deposits Rs. 12600 in a bank at 5% annual interest. After 8 months he withdraws Rs. 5400 together with interest and after 4 months the remaining money. How much does he get as interest at the end of the year?

Sol: S.I. of Rs. 12600 for 8 months

                       

He withdrew Rs. 5400 together with interest, the remaining amount

                        = 12600 - 5400 = Rs. 7200   

S.I. on Rs. 7200 at the rate of 5% for 4 months 

                                

            Total interest = 420 + 120 = Rs. 540
 

Bits

1. What would be the simple interest obtained on an amount of Rs.48640 at the rate of 6 p.c.p.a. after 2 years?
A) Rs.5208.60             B) Rs.5802.70            C) Rs.5836.80              D) Rs.5928.60

 

2. The simple interest accrued on an amount of Rs.26540 at the end of 5 years is Rs.3981. What is the rate of interest?
A) 3%             B) 8%             C) 6%             D) 4%

 

3. The rate of simple interest for which a sum of money becomes 5 times in 8 years is.... (SSC-CGL 2016)
A) 30%          B) 40%          C) 50%         D) 55%

 

4. A certain sum of money becomes Rs.950 in a span of 3 years and further to Rs.1550 in the span of 7 years at the same rate of simple interest. What would be the amount at the end of 10 years? (in Rs.)
A) 1900              B) 1750             C) 2150              D) 2000

 

5. A certain sum of money amounts to Rs.918 in 2 years and Rs.969 in 3.5 years at simple interest. What is the rate of interest? (SSC-CGL 2017)
A) 4%              B) 5%            C) 6%            D) 8%

 

6. A sum of money invested at compound interest amounts to Rs.1664 at the end of first years and Rs.1730.56 at the end of second year. Find the rate of interest?
A) 6%            B) 5%            C) 7%           D) 4%

 

7. What is the compound interest on a sum of Rs.12000 for 2 5/8 years at 8% p.a, when the interest is compounded annually? (Nearest to a rupee)   (SSC-CGL 2019)
A) Rs.2712           B) Rs.2642           C) Rs.2697            D) Rs.2654

 

8. The Simple Interest on a sum of Rs.50000 at the end of two years is Rs.4000. What would be the compound interest on the same sum at the same rate for the same period (in Rs.) (SSC-CGL – 2019)
A) 8000         B) 4080         C) 4040         D) 4008

 

9. A person lent Rs.10000 to B for 3 years and Rs.6000 to C for 4 years on simple interest at same rate of interest and received Rs.5400 in all from both of them as interest. What is the rate of interest? (SSC-CGL 2017)
A) 10%           B) 12.5%         C) 15%          D) 20%

 

10. A sum of money amounts to Rs.1984 in 3 years at a simple interest. If the rate of interest is raised by 25%, the sum amounts to Rs.2080 during the same period. Find the rate of interest?
A) 6%           B) 8%           C) 5%           D) 3%

 

11. A person lent certain sum of money at 5% per annum simple interest and in 15 years the interest amounted to Rs.250 less than the sum lent. What was the sum lent? (in Rs.) (SSC-CGL 2017)
A) 1000           B) 1500          C) 2400          D) 3000

 

12. On what sum does the difference between Simple Interest and Compound Interest for 3 years at 5% rate be Rs.549?
A) Rs.56000            B) Rs.24000          C) Rs.72000          D) Rs.32000

 

13. When two equal amounts are deposited for 5 years and 3 years at the rate of 7% and 9% per annum respectively and the difference of their simple interest is Rs.475. Then find the deposited amount? (SSC-CGL 2019)
A) Rs.5837.50           B) Rs.6037.50           C) Rs.5992.50            D) Rs.5937.50

 

14. A certain sum of money triples itself in 5 years at simple interest. In how many years it will be five times? (SSC-CGL 2017)
A) 5            B) 8            C) 10            D) 15

 

15. A certain sum of money invested at compound interest doubles in 3 years. In how many years will it become 6 times itself?
A) 3            B) 6            C) 8            D) 4

 

ANSWERS: 1-C; 2-A; 3-C; 4-D; 5-A; 6-D; 7-C; 8-B; 9-A; 10-B; 11-A; 12-C; 13-D; 14-C; 15-B.

Posted Date : 14-04-2021

 

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