Exercise : Compound Interest - General Questions
✔ Compound Interest -
General Questions
21.
A sum of money invested at Compound Interest amounts to $800 in 2 years and $1,200 in 4 years. What is the amount after 8 years?
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Answer: Option A
Explanation:
Explanation:
Growth factor for 2 years = \(1200/800 = 1.5\). Amount after 6 years = \(1200 \times 1.5 = 1800\). Amount after 8 years = \(1800 \times 1.5 = 2,700\).
22.
What is the effective annual rate of interest corresponding to a nominal rate of 10% per annum compounded half-yearly?
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Answer: Option A
Explanation:
Explanation:
\(E = (1 + r/n)^n - 1 = (1 + 0.05)^2 - 1 = 1.1025 - 1 = 0.1025\) or \(10.25%\).
23.
The Compound Interest on a sum for the 3rd year is $24.20 and for the 2nd year is $22. Find the rate of interest.
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Answer: Option A
Explanation:
Explanation:
The difference between the 3rd year interest and 2nd year interest is the interest on the 2nd year's interest. \(R = \frac{24.20 - 22}{22} \times 100 = 10%\).
24.
A builder borrows $25,500 to be paid back with 4% Compound Interest in two years by two equal installments. Find the installment amount.
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Answer: Option A
Explanation:
Explanation:
\(25500 = \frac{x}{1.04} + \frac{x}{1.04^2} \implies 25500 = \frac{1.04x + x}{1.0816} \implies x = \frac{25500 \times 1.0816}{2.04} = 13,520\).
25.
The difference between Compound Interest and Simple Interest on a sum for 2 years at 10% is \(x\). The difference for 3 years is \(y\). Find the ratio \(y/x\).
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Answer: Option A
Explanation:
Explanation:
\(x = P(R/100)^2\). \(y = P(R/100)^2 \times (3 + R/100)\). Therefore, \(y/x = 3 + R/100 = 3 + 10/100 = 3.1\).