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### Question 1

How much interest does an amount of Rs. 50000 earn @4% compounded annually for 2 years?

### Question 2

The difference in compound interest(annual compounding) and simple interest for a period of 2 years is Rs. 343. What is the principal amount if the rate is 7% p.a.?

**A**

Rs. 70000.

**B**

Rs. 80000.

**C**

Rs. 60000.

**D**

Rs. 90000.

**Soln.**

**Ans: a**

The shortcut formula for the difference between compound and simple interest over a period of 2 years is $Difference = Principal × (\text"rate"/100)^2$. So Principal = $(Difference × 10000)/(rate × rate)$ = $(343 × 10000)/(7 × 7)$ = Rs. 70000.

### Question 3

How much interest does an amount of Rs. 20000 earn @5% compounded annually for 2 years?

### Question 4

How much interest does an amount of Rs. 30000 earn @9% compounded annually for 2 years?

### Question 5

An interest rate of 4% compounded half-annually is offered by a bank. An account holder deposits Rs. 10000 in the bank under this scheme. After six months he again deposits Rs 10000. What is the total amount that he will get after 1 year?

**A**

Rs. 20604.

**B**

Rs. 21316.

**C**

Rs. 21116.

**D**

Rs. 21416.

**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 = 2 and P = 10000 and cancelling 10000, we get 1 × 102 × 202 = Rs. 20604. *Please note that the rate of interest will be 1/2 because the compounding is half yearly.*

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This Blog Post/Article "Compound Interest Quiz Set 017" by Parveen (Hoven) is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Updated on 2020-02-07. Published on: 2016-04-30