# Compound Interest Quiz Set 007

### Question 1

What is compound interest on Rs. 60000 after 2 years, invested at a rate of 7% compounded annually?

A

Rs. 8694.

B

Rs. 8794.

C

Rs. 8594.

D

Rs. 8894.

Soln.
Ans: a

The shortcut formula is CI = Pr(r + 200)/10000. Putting P = 60000, r = 7, we get \${60000 × 7 × (7 + 200)}/10000\$ = Rs. 8694.

### Question 2

Rs. 1242 is divided into parts such that the compound amount on first part after 2 years is same as that for the other part after 3 years. What is the first part if the rate of interest in both the cases is 7%?

A

Rs. 642.

B

Rs. 742.

C

Rs. 542.

D

Rs. 842.

Soln.
Ans: a

Let the parts P and (1242 - P). We have P × \$(1 + 7/100)^2\$ = (1242 - P) × \$(1 + 7/100)^3\$. Cancelling, we get P = (1242 - P) × (1 + 7/100). Simplifying, P = \${1242 × (100 + 7)}/(200 + 7)\$, which gives P = Rs. 642.

### Question 3

What is compound interest on Rs. 50000 after 2 years, invested at a rate of 5% compounded annually?

A

Rs. 5125.

B

Rs. 5225.

C

Rs. 5025.

D

Rs. 5325.

Soln.
Ans: a

The shortcut formula is CI = Pr(r + 200)/10000. Putting P = 50000, r = 5, we get \${50000 × 5 × (5 + 200)}/10000\$ = Rs. 5125.

### Question 4

A bank offers an interest rate of 9% compounded annually. Initially I deposit Rs. 20000 in the bank under this scheme. After 1 year I again deposit Rs 20000. What is the total amount that I will get after 2 years?

A

Rs. 45562.

B

Rs. 45662.

C

Rs. 45462.

D

Rs. 45762.

Soln.
Ans: a

Let P, A, r and n have their usual meanings. For the first deposit n = 2, and for the second deposit n = 1. So total amount is P × \$((1 + r/100)^2 + (1 + r/100))\$ = \$P/10000\$ × \$((100 + r)^2 + 100(100 + r))\$ = \$P/10000 × (100 + r)\$ × \$(100 + r + 100)\$ which equals \${P × (100 + r) × (200 + r)}/10000.\$ Putting r = 9 and P = 20000 and cancelling 10000, we get 2 × 109 × 209 = Rs. 45562.

### Question 5

What is the amount receivable on Rs. 5000000 after 9 months, invested at a rate of 16% compounded quarterly?

A

Rs. 5624320.

B

Rs. 5624420.

C

Rs. 5624220.

D

Rs. 5624520.

Soln.
Ans: a

In this case r = \$16/4\$% and n = 3 because compounding is quarterly, and in 9 months there are three quarters. So A = 5000000 × \$(1 + 4/100)^3\$, which equals 5 × 104 × 104 × 104, i.e., Rs. 5624320.