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Quiz: Compound Interest

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Number of Questions: 30

Question: 11 -

A sum is taken for 2 years at 12% per annum. If the interest is compounded every 6 months, how many times will the interest be charged in 1 year?

Options:

  1. 4

  2. 2

  3. 1

  4. 3

    5. Answer:

    4
    Solution:

    The interest is charged every six months,
    Rate = 12 %
    = 12/2 = 6%
    Time = 2 years
    = 2 × 2 = 4 half – periods
    The interest will be charged four times in two years.

Question: 12 -

What will be the rate for a sum taken for 5 years at 8% p.a. compounded half-yearly?

Options:

  1. 8%

  2. 4%

  3. 5%

  4. 7%

    5. Answer:

    4%
    Solution:

    The interest is charged half-yearly
    So, the rate will be divided by 2
    Rate = 8%
    = 8/2 = 4%

Question: 13 -

A man took loan of Rs. 65,250 from HSBC Bank. If the rate of interest is 9% p.a., then what will be the difference in the amounts he would be paying after 1 year if the interest is compounded quarterly and compounded annually?

Options:

  1. 65.5

  2. 69.05

  3. 72.4

  4. 70

    5. Answer:

    69.05
    Solution:

    Case 1: Interest is compounded half-yearly
    Principal = Rs 65250
    Rate = 9%
    Time = 1 year
    Since, interest is charged half-yearly,
    Rate = 9 %
    = 9/2%
    Time = 1 year = 2 × 1 = 2 half-years
    Amount = Principal (1 + R/100)t
    = 65250 (1 + 4.5/100)2
    = 65250 (209/200)2
    = 71254.63
    Case 2: Interest is compounded quarterly
    Principal = Rs 65250
    Rate = 9%
    Time = 1 year
    Since, interest is charged quarterly,
    Rate = 9 %
    = 94%
    Time = 1 year = 4 × 1 = 4 quaters
    Amount = Principal (1 + R/100)t
    = 65250 (1 + 2.25/100)4
    = 65250 (409/400)4
    = 71323.68
    Difference in the amounts in both cases = 71323.68 – 71254.63 = 69.05

Question: 14 -

What will be the amount to be paid at the end of 3 year on Rs. 500 at 10% per annum compounded half-yearly?

Options:

  1. 638.15

  2. 638.14

  3. 657.12

  4. 645.78

    5. Answer:

    638.14
    Solution:

    Interest is compounded half-yearly
    Principal = Rs 500
    Rate = 10%
    Time = 3 year
    Since, interest is charged half-yearly,
    Rate = 9 %
    = 10/2% = 5%
    Time = 3 year = 2 × 3 = 6 half-years
    Amount = Principal (1 + R/100)t
    = 500 (1 +5/100)6
    = 500 (21/20)5
    = 638.14

Question: 15 -

What will be the time period for a sum taken for 3 years at 12% p.a. compounded half-yearly?

Options:

  1. 3.5

  2. 6

  3. 3

  4. 4

    5. Answer:

    6
    Solution:

    The interest is charged half-yearly
    So, the time will be multiplied by 2
    Time = 3
    = 2 × 3 = 6 half – yearly
    The interest will be charged 6 times in 3 years.