CAT Simple & Compound Interest Questions

Simple interest uses the original principal throughout, while compound interest applies each period's rate to the accumulated amount. Compounding frequency and changing rates affect the calculation.

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Key concepts

• Principal, rate, time and amount
• Simple versus compound growth
• Compounding frequency

CAT simple & compound interest practice questions

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Common mistakes

• Using an annual rate unchanged for a half-yearly period.
• Applying simple-interest addition to compound growth.

Practical solving approaches

• Match the rate and time to the compounding period.
• Use successive growth factors for changing rates and separate interest from the final amount.

Simple & Compound Interest FAQs

How does half-yearly compounding change the calculation?

For a nominal annual rate compounded half-yearly, use half the annual rate for each half-year and twice as many periods as the number of years.

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CAT Simple & Compound Interest Questions

Simple interest uses the original principal throughout, while compound interest applies each period's rate to the accumulated amount. Compounding frequency and changing rates affect the calculation.

6 free practice questions

Key concepts

• Principal, rate, time and amount
• Simple versus compound growth
• Compounding frequency

CAT simple & compound interest practice questions

Question 1Type in the answerEASY

Question 1

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Answer the questions independently of each other.

Piyush pays an interest of 23% p.a. upto Rs.700 and 22% p.a. on the part of the loan in excess of Rs. 700. How much interest will he pay on a loan of Rs.6000 for one year?

Your answer

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Question 2Type in the answerEASY

Question 2

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Rs.24400 are lent in two parts, one at 14% p.a. simple interest and the other at 18% p.a. simple interest. If the total interest earned after two years is Rs.7320, then find the amount lent at 14% p.a.

 

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Question 3Type in the answerEASY

Question 3

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A man invests Rs.50000 in two different mutual funds (M.Fs) in the ratio 3 : 2 at different interest rates. After 10 years, the total worth of this amount is Rs.385000. What is the difference between the rates of interest for the two mutual funds if the total amount accrued is same for both the M.Fs after 20 years?

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Question 4Multiple choiceMEDIUM

Question 4

Select the correct alternative from the given choices.

Answer the questions independently of each other.

There are two investment schemes X and Y as follows:

Scheme X: Rate of interest = 10%; period of maturity = 2 years.
Amount is returned with compound interest.
Scheme Y: Rate of interest = 11%; amount is returned with simple interest.
For what duration, should I invest Rs.25,000 in scheme Y, so as to get same amount in return, if I had invested in scheme X?

Choose an answer

A.

B.

C.

D.

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Question 5Multiple choiceHARD

Question 5

Select the correct alternative from the given choices.

Answer the questions independently of each other.

The value of a specific bike gets depreciated at the rate of 8% p.a. If the bike was sold at Rs.10000, 8 years after it was manufactured, what was the approximate depreciation in the price of the bike in these 8 years? (log92 = 1.9638 and 100.29 = 1.9498)

Choose an answer

A.Rs.9590B.Rs.6930C.Rs.9500D.Rs.3950

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Question 6Multiple choiceMEDIUM

Question 6

Select the correct alternative from the given choices.

Answer the questions independently of each other.

Vijay takes a loan of Rs.5000 from Ajay at a simple interest of 5% p.a. and agrees to pay it back in 3 years. Ajay gives him 2 options, either to pay the full amount with the interest at the end of the 3 years or pay the amount in 3 equal annual installments. Vijay chooses the option in which he has to pay less interest. What is the total amount that Vijay pays?

Choose an answer

A.Rs.5750B.Rs.5508C.Rs.5974D.None of these

Check answerView solution

Common mistakes

• Using an annual rate unchanged for a half-yearly period.
• Applying simple-interest addition to compound growth.

Practical solving approaches

• Match the rate and time to the compounding period.
• Use successive growth factors for changing rates and separate interest from the final amount.

Simple & Compound Interest FAQs

How does half-yearly compounding change the calculation?

For a nominal annual rate compounded half-yearly, use half the annual rate for each half-year and twice as many periods as the number of years.

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