Quantitative aptitude Problems on Compound Interest

1 What is Compound interest?

Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on. This addition of interest to the principal is called compounding.

Compound interest is standard in finance and economics and Compound Interest formula is as follows

A = P (1 + r/n)^nt
Where
A = Future Value
P = Initial Deposit Amount
n = Compounding Frequency
r = Rate of interest in %
t = Number of years invested tenure

2 Calculator

Calculate

Initial Deposit (P)

Compounding Frequency (n)

Rate of Interest (r) (% per year)

Number of Years

Take Compound Interest quiz

3 Examples

1 Find the compound interest on Rs. 8000 at 4% per annum for 2 years, compounded annually.

632.80
650.00
652.80
672.80

Solution:
Answer: C

Explanation:
Principal Amount (P) = 8000
Interest Rate (r) = 4 %
Period (t) = 2 Years
Compounding Frequency (n) = 1

$= (8000 \times (1 + \frac{4}{100})^{2}) - 8000$
$= 652.80$

2 Find the compound interest on Rs. 8695 at 4% per annum for 3 years, compounded monthly.

Rs. 1106.63
Rs. 1126.63
Rs. 1206.63
Rs. 1236.63

Solution: Answer: A Explanation: Principal Amount (P) = 8695 Interest Rate (r) = 4 % Period (t) = 3 Years Compounding Frequency (n) = 12

= (8695 \times (1 + \frac{4}{100})^{2 × 12}) - 8695

= 1106.63

3 Calculate the future value of Rs. 4,000 invested at 7% for 5 years

Rs. 5500.21
Rs. 5510.00
Rs. 5600.00
Rs. 5610.21

Solution: Answer: D Explanation: Principal Amount (P) = 4000 Interest Rate (r) = 7 % Period (t) = 5 Years Compounding Frequency (n) = 1

= (4000 \times (1 + \frac{7}{100})^{5})

= 5610.21

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