Chapter Interest is the additional amount of money paid to the lender b the borrower for oA 4 petiod of time, The term ‘interest is commonly tsed i the Borrower for ung the botrowed money for a specific banking, & SIMPLE INTEREST Simple ineret is caleulated only onthe principal amount (or on that portion ofthe principal amount which remains unpald Simple interes (oe 100 where Pis the Principal or the original sum borrowed; Ris Rate of interest (its the rate at which the interest is calculated on the original sum); T'is Time for which the original sum is borrowed. T's also denoted as ‘n’. ‘Amount (4) is the sum of the principal and interest and is given by RT 1+ 100 Aa pee 100. COMPOUND INTEREST The interest is added to the principal at the end of each period to arrive at the new principal for the next period. The resultant interest is termed as compound interest. Under compound interest, the amount at the end of the first year will become principal for the second year; the amount at the end of the second year becomes the principal for the third year and so on. RY Amount after ‘n’ years= P| 1+——~ é 100 Given amount and principal we use the following formula to find interest “rl 34 % for first, second and third years respectively, the amount can be 1 When rates are different for different years, say 7% 7% caloulated as ; k = pP(i+— i+ J+ Tora) Gare) Oa res Ee ig If the number of times of compounding in 9 year's ine eased 10 infinity, cha mene’, the amount is given by i compounding every morSemi-Annual and Quarterl If the interestis added to the principal every 6 months, a year. The amount is calculated as Similarly, ifthe interest is calculated is calculated as Comparing SI and cl Fora positive rate of interest ‘R’ and a RT of simple interest is P(14+ 7) 3 100, When Tis 1, the ewo values are the ‘When Tis 2, the amount from SI is Teis dear that for T= 2, Clis [GF] ‘more than'SI. Similarly for all 7>-1, Cl is always greater chan SI. Note: The effective rate of interest i interest over the same period, VALUE OF MONEY Therefore, TION A: QUANTITATIVE APTITUDE ly Compounding then itis said to be compounded half-yeatly or semi-an RYE Plat Cr) and added four times in a year, then ic is said to be compounded quarterly. The, ow Pit. (Can time duration ‘7°, che amount of compound interest is a 14+ while he amg same. H 2 P1428) and cris P14 2h «(2 f) 100 100 (100 s that rate of simple interest which will result in an interest ‘equal to that of the com A=P anil 100TA this forms a GP and hence the sum can be calculated from which the value of the equal ins ‘computed: ye value of the equal instalment can be can be PR 0 {i a (100+) {POPULATION problems on population change can be solved using the concepts of compound interest, The principal ale principal is equivalent to original population and the rate of interest is equivalent to annual, eee brio ta er eee ee change is , the population can decrease as well SOLVED EXAMPLES 4, Find the simple interest on a principal of Rs. 3200 at 8% per annum for a period of 4 years ane B. Rs. 1024 CRs. 735. [Link]. 936 = Rs. PRT. _3200x8x4 Simple interest = 100 100 = Rs. 1024 The answer is option (B). 4, Whatis the amount of compound interest atthe end of 3 years on a sum: of Rs, 15638 at 10% per annum? ARs. 20814 B. Rs. 19824 [Link]. 21924 D. Rs..19784 Solution: Amount after ‘n’ years is 15638(1.1}° = Rs. 20814 (approximately) (, aerkt f pii+—-| =156 esl 15638| 1+ The answer is option (A). 3. On what sum of money, does the difference berween the compound and simpl fos , ¢ compound and simple interest for 2 years at 10% pt amount to Rs. 5431? ei es ARs. 543100 B. Rs, 624324 . Rs. 654723 D. Rs. 526842 Solution: Let the principal amount be Rs. P. We have ? on Ae aE <2 59h be POAT p(s) Aes 4317 (cana =5431 100) \ 100 1007 100 = P(t -(P +0.2P) 5431 => P(L21) ~(1.2P) = 5431 => 0.01P 431 => P=Rs 3100 Prof X. Mad-a-matics a | yar ou thought that was the only waytt Haba ) | “There isan alternate approach cobra hs HOOIE: : | | Sbseee set | | ae I i & y) Second J 1 Toul «2 Dall The ilrence, Clo} = 00h eeea tas 1 =54910, which i 1096 ofthe principal So Principal = Rs. 549100. , | The answer is option (A). ——— rll¥ A certain sum amounts to Rs. 14400 after 2 years and to Rs. 17280 after 3 years, interest being com ally. Find the principal. A. Rs. 14568 B. Rs. 13485 C. Rs, 10000 D. Rs. 12584 Solution: Interest for third year will be the difference in the amounts at the end of the second and third year, Interest for the third year = 17280 ~ 14400 = Rs, 2880. Rate of interest is 2880 14400 100 = 20% Let the principal amount be P. So 2 P22) =14400 = P(1.2)? = 14400 => P = Rs. 10000 The answer is option (C). 2 5+ The birth rate of «town with population of 200000 is 10%. Considering there are no death in the town, wh ‘he population ofthe sown in 2 years? A. 254100 B. 346724 C. 421323 D. 412356 Solution: Population after 2 years will be 0 2 P =200000 1+ ) = 200000(1.1) = 242000 100 Population after ay ‘years will be 100 P= 42000(1 Ulan *) 242000(1-+ 0.05) =254100 The answer is option (A). & A sum of money in 4 years becomes 2016 and in 9 years becomes Rs, 2286. What is the principal sum w simple rate of interest is to be charged? A. Rs. 1600 B. Rs. 1750 C. Rs. 1800 D. Rs. 1850 Solution: The interest for 5 (i.c., 9 — 4) years is 2286 - 2016=Rs. 270 So, Rs. 54 is che interest for 1 year. It means Rs. 216 is the interest for 4 years on the actual principal. Therefore Principal = 2016 ~ 216 = Rs. 1800 The answer is option (C), 7, Asum of money doubles itself in 14 years. In how many years would it triple itself under ST? A.26 B28 C.30 D.32 Solution: To find the rate of interest PxidxR 100 Rie eee Now, Px100xN De NE he 100 x14 aa Alternatively, it can be seen that as it takes 14 years for the interest to become P, and so it will take 28 years 100 aeeS SS 10, ML, directly propo Note: nal to the time prinetpal remai 3 'e period, provided the rate of ‘The answer is option (B). brovided the rate of interest and the principal remain constant. ‘Aum of Rs. 690 was taken as a loan. This isto be ‘compounded annually, then find the value of each instalment ALRs. 624 B. Rs. 507 CRs 543 D. Rs, 639. Solution: Using the formula for ewo instalments, where is the value of insta value of instalment, we have =o90=x/(1),(- 23 (Gah ae uid ba Paid back in two equal instalments. Ifthe rate of interest be 30% p=|-— + (: ; i (3) ‘The answer is option (B). ‘The amounts for compound interest on a certain sum at a i Rs. 19860 and Rs. 21846, respectively. What is the meeiincnd. | to ni 1s oe ae A. 10% B. 20% C. 30% D. 40% Solution: 21846 _[ eke 1986 R 15860 (“100 a a 14 = R= Tacha oe z Je = ProfX. Mad-a-matics . “The difference between the compound interest of any two consecutive years will Be same as the interest on the amount of total previous years. So 21846 ~ 19860 = 1986 | | Therefore 1986 190 =10% wrth ih | 19860 The answer is option (A). Vineeth borrowed Rs. 1200 at 15% rate of interest. He repaid Re. 560 at the end of the first year. What is the amount paid by him at the end of the second year to discharge his loan which was calculated at simple interest? ARs. 1150 B. Rs. 1258 CRs. 1342 D. Rs. 1347 Solution: Amount to be paid at the end of 2 years is 120015%? | 1299=1560- 100 econd year = 1560 ~ 560 = 1000 100015 ‘Amount o be paid after the second year = 1000+ Amount lefc as principal for the s 150 Hence, the amount to be paid is Rs, 1150 The answer is option (A). hcbe 1% hi ‘A sum was put at simple interest at a certain rate for 4 years. Had it been put at 8 fetched Rs, 768 more. Find the sum. D. Rs. 3462 pane 2400 B. Rs, 3248 ©, Rs. 2964 ———ETE EGET Solution: For SI, p 76800 ow A xl(R+8)~ R)= 768: P = 25800. 2409 100 32 The answer is option (A), 12, Ifthe rate of interest is 20% p.a. and Rs. 16000 is lent at the compound interest, half-yearly, what is the ‘simple rate of interest for the first year? A.21% B. 34% C.28% Solution: D, 37% = 16000(1.1)? =16000(1.21) = Rs. 19360 = Pl1+ Amount, A a ji SI=19360~16000 = 3360 3360 — 15000 Rx2 2x100 Hence, equivalent SI for frst year, R= 21%, The answer is option (A). 19. Despak purchased a TMD bike 4 years ago for Rs. 150000, Its value deprecated each year at 20% pa. What i present value of the bike? 4 ARs, 61440 B. Rs, 72543 Solution: C. Rs. 764218 D. Rs. 59879 1atog sd 4 Derrecation 170000 ea 150000 x{ =] =Rs. 61440 The answer is option (A). 14. Ishwarya purchased a hotel worth Rs. 14 lakhs and Manisha purchased a car worth Rs. 11 lakhs, The value of Fut (mereases by 10% of the previous value and the value of car every year depreciates by 20%. What difference between the price of hotel and car after 3 years? : A. 1324423 B. 1475628 C. 1434257 D. 1300200 Solution: ee Worth ofhore afer 3 years = 1400001 Too) = Bs 1863400 {20 Worth of car after 3 years = 1100000} 1- Foal = Rs, 563200 \ So, the difference in their worth is 1863400 ~ 563200 = Rs, 1300200. ‘The answer is option (D). of eagles 3 years ago? A. 50000 B, 55000 ©. 45000 D, 40000 Solution: Let the population of eagles 3 years ago be P, a i 100 armor 10% Pt ( 100 ) iNow 10 Phi-22) = 29160 5 p= (i004 = P= 40000 Hence, the population P = 40000. SEXERCISE 1