This EduRev document offers 20 Multiple Choice Questions (MCQs) from the topic Simple & Compound Interest (Level - 1). These questions are of Level - 1 difficulty and will assist you in the preparation of CAT & other MBA exams. You can practice/attempt these CAT Multiple Choice Questions (MCQs) and check the explanations for a better understanding of the topic.
Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:What is the simple interest for 9 years on a sum of ₹ 800 if the rate of interest for the first 4 years is 8% per annum and for the last 4 years is 6% per annum?
Explanation
8% of 800 for 4 years + 6% of 800 for 4 years = 64 x 4 + 48 x 4 = 256 + 192 = 448. However, we do not know the rate of interest applicable in the 5th year and hence cannot determine the exact simple interest for 9 years.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Find the compound interest on ₹ 1000 at the rate of 20% per annum for 18 months when interest is compounded half-yearly.
Explanation
Compound interest = 1331 – 1000 = ₹ 331
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Find the principal if compound interest is charged on the principal at the rate of % per annum for two years and the sum becomes
Explanation
P x 7/6 x 7/6 = 196 → P = (196 x 6 x 6)/7 x 7
= 144.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:In what time will ₹ 3300 become ₹ 3399 at 6% per annum interest compounded half-yearly?
Explanation
Since compounding is half yearly, it is clear that the rate of interest charged for 6 months would be 3%
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:At what percentage per annum, will ₹ 10,000 amount to 17,280 in three years? (Compound Interest being reckoned)
Explanation
Solve through options:
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:What is the rate of simple interest for the first 4 years if the sum of ₹ 360 becomes ₹ 540 in 9 years and the rate of interest for the last 5 years is 6%?
Explanation
For the last 5 years, the interest earned would be: 30% of 360 = 108. Thus, interest earned in the first 4 years would be ₹ 72 → ₹ 18 every year on an amount of ₹ 360- which means that the rate of interest is 5%
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Ranjeet makes a deposit of Rs.50,000 in the Punjab National Bank for a period of 2 1/2 years. If the rate of interest is 12% per annum compounded half-yearly, find the maturity value of the money deposited by him.
Explanation
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:₹ 1200 is lent out at 5% per annum simple interest for 3 years. Find the amount after 3 years.
Explanation
The annual interest would be ₹ 60. After 3 years the total value would be 1200 + 60 x 3 = 1380
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:₹ 2100 is lent at compound interest of 5% per annum for 2 years. Find the amount after two years.
Explanation
2100 + 5% of 2100 = 2100 + 105 = 2205 (after 1 year). Next year it would become: 2205 + 5% of 2205 = 2205 +110.25 = 2315.25
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Find the difference between the simple and the compound interest at 5% per annum for 2 years on a principal of ₹ 2000.
Explanation
Simple Interest for 2 years = 100 + 100 = 200.
Compound interest for 2 years: Year 1 = 5% of 2000 = 100.
Year 2: 5% of 2100 = 105 → Total compound interest = ₹ 205.
Difference between the Simple and Compound interest = 205 – 200 = ₹ 5
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:After how many years will a sum of ₹ 12,500 become ₹ 17,500 at the rate of 10% per annum?
Explanation
12500 @ 10% simple interest would give an interest of ₹ 1250 per annum. For a total interest of ₹ 5000, it would take 4 years.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:What is the simple interest on a sum of ₹700 if the rate of interest for the first 3 years is 8% per annum and for the last 2 years is 7.5% per annum?
Explanation
8% @ 700 = ₹ 56 per year for 3 years 7.5% @ 700 = ₹ 52.5 per year for 2 years Total interest = 56 x 3 + 52.5 x 2 = 273.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:What is the difference between compound interest and simple interest for the sum of ₹ 20,000 over a 2 year period if the compound interest is calculated at 20% and simple interest is calculated at 23%?
Explanation
Simple interest @ 23% = 4600 x 2 = 9200 Compound interest @ 20%
→ ₹ 8800 compound interest. Difference = 9200 – 8800 = ₹ 400.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Find the principal if the interest compounded at the rate of 10% per annum for two years is ₹ 420.
Explanation
Solve using options. Thinking about option (a): 2000 → 2200 (after 1 year) → 2420 (after 2 years) which gives us an interest of ₹420 as required in the problem. Hence, this is the correct answer.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:The SBI lent ₹ 1331 to the Tata group at a compound interest and got ₹ 1728 after three years. What is the rate of interest charged if the interest is compounded annually?
Explanation
1331 x 1.090909 x 1.090909 x 1.090909 = 1331 x 12/11 x 12/11 x 12/11 = 1728. Hence, the rate of compound interest is 9.09%.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Ranjan purchased a Maruti van for ₹ 1,96,000 and the rate of depreciation is per annum. Find the value of the van after two years.
Explanation
The value of the van would be 196000 x 6/7 x 6/7 = 144000
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Vinay deposited ₹ 8000 in ICICI Bank, which pays him 12% interest per annum compounded quarterly. What is the amount that he receives after 15 months?
Explanation
12% per annum compounded quarterly means that the amount would grow by 3% every 3 months.
Thus, 8000 → 8000 + 3% of 8000 = 8240 after 3 months → 8240 + 3% of 8240 = 8487.2 after 6 months and so on till five 3 month time periods get over. It can be seen that the value would turn out to be 9274.2.
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Harsh makes a fixed deposit of ₹ 20,000 with the Bank of India for a period of 3 years. If the rate of interest be 13% SI per annum charged half-yearly, what amount will he get after 42 months?
Explanation
He will get 20000 + 45.5% of 20000 = 29100. [Note: In this case we can take 13% simple interest compounded half yearly to mean 6.5% interest getting added every 6 months. Thus, in 42 months it would amount to 6.5 x 7 = 45.5%]
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Vinod makes a deposit of ₹ 100,000 in Syndicate Bank for a period of 2 years. If the rate of interest be 12% per annum compounded half-yearly, what amount will he get after 2 years?
Explanation
100000 + 6% of 100000 (after the first 6 months) = 106000.
After 1 year: 106000 + 6% of 106000 = 112360 After 1 ½ years: 112360 + 6% of 112360 = 119101.6 After 2 years: 119101.6 + 6% of 119101.6 = 126247.69
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Question for Practice Questions Level 1: Simple & Compound Interest - 2
Try yourself:Ajay borrows ₹ 1500 from two moneylenders. He pays interest at the rate of 12% per annum for one loan and at the rate of 14% per annum for the other. The total interest he pays for the entire year is ₹ 186. How much does he borrow at the rate of 12%?
Explanation
The average rate of interest he pays is 186 x 100/1500 = 12.4%.
The average rate of interest being 12.4%, it means that the ratio in which the two amounts would be distributed would be 4:1 (using alligation). Thus, the borrowing at 12% would be ₹ 1200.
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