Simple Interest and Compound

Interest for SSC & Railways

Exams
By : Sachin Awasthi

Updated : Nov 6, 2020, 13:58

Simple Interest and Compound Interest questions are most common in Government
exams such as SSC CGL, SSC CHLS and other Railway Exams. Simple Interest
and Compound Interest topic should not be skipped as it is highly scoring and if
prepared in the correct manner can help you improve your score tremendously.

Understand all the details about Simple Interest and Compound Interest topic, the
best way to prepare Simple Interest and Compound Interest questions, best books to
refer to, important tips and more. This article shows how to use these correct formula
and tricks for calculating interest. . Knowledge of computing simple and compound
interest will be useful for those appearing for the following exams:

 SSC CHSL Tier I

 SSC CGL Tier I (Preliminary)
 RRB Mathematics Section

Important Simple Interest and Compound Interest

Topics

When you borrow money from a bank (or any other lender), the bank needs to make
a profit from the act of lending to sustain itself. And so it charges a service fee. This
fee charged by the bank is called interest.

A borrowed amount is usually repaid in monthly or yearly instalments. And every

month/year the principal amount is returned along with interest to the lender. There
are two kinds of interest that are calculated: simple and compound.

Simple Interest: If interest is being calculated on the principal amount borrowed, it is

called simple interest.

Compound Interest: If the interest is being calculated on the principal amount + the
accumulated interest amount, it is called compound interest.

Simple Interest and Compound Interest Formulas

Simple Interest Formulas Compound Interest Formulas

 CI = A - P

When interest is compounded every year, the following

SI = (P x R x T) / 100
formula is used.
A = P (1 + R/100)t
A = Total amount to the paid
SI - Simple Interest
P = Principal Amount
P - Principal Amount
R = Rate of Interest
R - Rate of Interest (in %)
t = Time period for which money is borrowed.
T - Time period for which money is
borrowed (no. of years)
When the interest is compounded more than once a year
the following formula is used:
A = P + SI
A = P (1 + (R/n) /100)nt
A - The total amount to be paid at the end
of the lending period.
n - number of times a year interest is calculated
nt - number of times interest is calculated x time period
for which money is borrowed

Sample Problems for Simple Interest

Difficulty
No Question, Answer and Solution
Level
What amount will be paid when simple interest is calculated on a principal sum of
8600 at the rate of 7% for 4 years?
Answer: 11008
1 Low
Solution
SI = P x N x R / 100 = 8600 x 7 x 4 / 100 = 2408
A = P + SI = 8600 + 2408 = 11008
2 Medium A sum of 500 becomes 530 when simple interest is calculated for a period of 3
years. If the simple interest is increased by 5% what Amount will be calculated at
the end of 3 years.
Answer: 605

Solution
A = P + SI
530 = 500 + SI
SI = 30

SI = P x N x R / 100
30 = 500 x 3 x R / 100
R=2
 If R is increased by 5%, R = 7%
Hence SI = 500 x 7 x 3 / 100 = 105
A = P + SI = 500 + 105 = 605
If a sum of money gets doubled when simple interest is calculated over a period of
5 years, what is the rate at which interest has been calculated?
Answer: 20%

Solution
A = SI + P
3 High
2x = x + SI
SI = x

SI = P x N x R / 100
x = x x 5 x R / 100
R = 20%

Sample Problems for Compound Interest

Difficulty
No Question, Answer and Solution
Level
A hawker lends Rs. 2500 at the rate of 2% compound interest. How much extra
money will he have earned at the end of 2 years.
Answer: Rs. 101

Solution
A = P (1 + R/100 )t
1 Low A = 2500 (1 + 2/100 )2
A = 2500 (102/100)]2
A = 2500 x (1.02)2
A = 2500 x 1.0404
A = 2601

CI = A - P = 2601 - 2500 = 101

In how many years will a principal amount of Rs. 1000 become Rs. 1728 when
compounded annually at the rate of 20% per annum.
Answer: 3 years

Solution
2 Medium A = P (1 +R/100)t
1728 = 1000 (1 + 20/100)t
1728 = 1000 (120/100)t
1728 / 1000 = (12/10)t
t=3
 What will the compound interest for a period of 6 months calculated quarterly at
the rate of 20% on a principal amount of Rs. 32,000 be?
Answer: Rs. 4,280

Solution
A = P ( 1 + (r/n)/100 )tn
3 High CI + P = P ( 1 + ( r/n) /100 )tn
CI + 32000 = 32000 ( 1 + (20/4) /100)4 x (6/12)
CI + 32000 = 32000 (1 + 5/100)4 x ½
CI + 32000 = 32000 ( 105/100)2
CI + 32000 = 32000 x 105/100 x 105/100
CI + 32000 = 32000 x 21/20 x 21/20
CI + 32000 = 36280
CI = 4280

Tips to Solve/ Prepare for Simple and Compound Interest Questions

 Short Cuts

When beginning preparation for exams, it is best that students understand the basics
very well and solve all the questions on their own by using the basic formulas and
natural logic. Once the students have understood the fundamentals, they can then
use shortcuts that they will develop on their own, or from other sources.

If students are not good at the basic level, somewhere, they will rely on the limited
set of questions they have been exposed to and will not be able to solve a question
that even slightly deviates from the questions they know.

In any case, here are some quick ways to solve questions:

Simple Interest

1. The total amount payable including simple interest is A = P + SI.

SI = (P x T x R) / 100

To directly calculate A use the formula P + (P x T x R)/100 instead of doing it in two

steps.

1. If a sum becomes 5 times the original amount over a period of 10 years the
rate of interest can be calculated thus:

R = 100 (5-1) / 10

Compound Interest

1. CI = P [ 1 + R/100]t – P
2. When compound interest is calculated every six months R = R / 2 and t = 2t.
 3. When the rates of interest are different for, say, 3 consecutive years, the total
amount including interest is calculated in this way: P ((1 + r1)/100)((1 +
r2)/100) ((1 + r3)/100)

 Develop your own Formulas

There are 2 basic formulas for calculating the SI/CI and the total amount to be paid,
including interest. For both types of interest, one needs the rate of interest, the time
period and the principal amount. Once you’ll start solving questions, you will become
used to the direct formulas for calculating the rate of interest, time and the principal
amount. This will be a huge time saver in the exam.

 Read the Question Carefully

Read the question carefully before you rush to answer it. Take more time to read the
question and less to work it out. With good practice, once you’ve understood the
question, solving it will be quick.

Importance of Simple and Compound Interest Section in Government

Exams

 In the SSC CGL Tier 1 exam and the SSC CHSL exam, the quantitative
sections carry 200 marks and 50 marks respectively and 1-2 questions in this
section are simple and compound interest questions.
 These are questions of moderate difficulty and fair practice in this area will
earn the student easy marks in the exams.
 These are basic arithmetic problems and in most cases, a direct application of
given formulas yields the answer.
 As these problems are relatively easier students should work hard on them as
they prepare for the exam such that they answer these questions quickly and
save time for the more difficult problems and sections.

Most Recommended Books for Simple and

Compound Interest
Author Book Title
N Tyra and K Kundan (Translator) Magical Book on Quicker Math (2018)
R. S. Aggrawal Quantitative Aptitude for Competitive Exams (2017)

Why prepare for Simple and Compound Interest from BYJU'S Exam
Prep?

BYJU'S Exam Prep is an exam preparation platform that prepares students for
various competitive exams in India including SSC and railway exams. It offers
bilingual instruction -- in English and Hindi. The instruction includes the teaching of
concepts, regular quizzes and the solving of old papers. Experts in various fields
design the instruction manuals, student performance is thoroughly evaluated and
students are given an all-India rank. The instruction and quizzes are designed
keeping in mind the latest exam patterns. In addition, BYJU'S Exam Prep also
provides full-fledged tests that can be procured for a price. This is an online portal,
hence accessible from anywhere and it encourages healthy competition among
students.

Frequently Asked Questions about Simple and Compound Interest

Ques: The difference between CI and SI on a certain amount at 10% interest

rate for two years is Rs. 100. What is the principal amount?

Solution:

CI - SI = 100

SI = P x T x R / 100 = x x 2 x 10 / 100 = x /5

CI = P (1 + R/100)t − P = x (11/10)2 − x = 121/100x − x = 21/100x

CI - SI = 100

21/100x − x /5 =100

x = 10000

Ques: Calculate the simple interest on the amount of Rs. 10000 at the rate of
10.5% per annum from 6 March to 29 July 2020.

Answer: 420

Solution

SI = P x N x R / 100

P = 10000

R = 105 / 10

T = [5 March - 29 June = 146 days or 2 / 5 of a year] 2 / 5

SI = 10000 x 105 x 2 / 100 x 10 x 5 = 420

Calculate the amount to be paid when simple interest is calculated on a

principal amount of Rs. 2100, at a rate of 8.5% for 18 months.

Answer: Rs. 2635.5

Solution

SI = P x N x R / 100
P = 2100

N = 18 months [N refers to number of years. Hence 18 / 12] = 18 / 12 = 3 / 2

R = 8.5%

SI = 2100 x 85 x 3 / 100 x 2 x 10 = 267.75

A = P + SI = 2100 + 267.75 = Rs. 2367.75

Ques: The simple interest on a certain sum at the rate of 5% per year for 8
years is Rs. 2000. At what rate of interest can the same amount of interest be
received on the same sum after 5 years.

Answer: 8%

Solution

SI = P x N x R / 100

2000 = P x 8 x 5 / 100

P = 5000

2000 = 5000 x 5 x N / 100

N = 8%

Ques: What will the compound interest at the rate of 12% on the principal
amount of Rs. 50000 at the end of 4 years be?

Answer: 28,675.968

Solution

A = P (1 + R/100)t

A = 50000 (1 + 12/100)4

A = 50000 (112/100)4

A = 50000 x 28/25 x 28/25 x 28/25 x 28/25

A = 78,675.968

CI = 78,675.968 - 50000 = 28,675.968

Ques: In how many years will an amount lent at 40% compound interest be
more than doubled?
Answer: 3 years

Solution

CI = A - P

A = P ( 1 + R/100 )t

As per the problem P ( 1 + R/100)t > 2P

( 1 + 40/100 )t > 2

(6/5)t > 2

6/5 x 6/5 / 6/5 > 2

t=3