எண் எழுத்து இகழேல்

CSAT
CRASH COURSE
TOPIC : SIMPLE INTEREST AND
COMPOUND INTEREST

Page 1
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
 INDEX

S.NO TOPIC PAGE.NO

1. BASICS 03

2. PRACTICE QUESTIONS 07

Page 2
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
Simple and Compound Interest
Simple Interest
Simple Interest (S.I) is the method of calculating the interest amount for some principal amount of money.
𝑃𝑁𝑅
Formula for Simple Interest, SI =
100
Where,
P = Principal
N = Number of years. R = Rate of Interest
Amount = Principal + Interest
A = P + SI

Example: A sum of Rs. 10,000 is borrowed at a rate of interest 15% per annum for 2years. Find the
simple interest on this sum and the amount to be paid at the end of 2 years.
On Rs. 100, interest charged for 1 year is Rs. 15.
So, on Rs. 10,000, interest charged = 15/100 × 10000 = Rs. 1500 Interest for 2 years = Rs. 1500 × 2 = Rs.
3000
Amount to be paid at the end of 2 years = Principal + Interest
= Rs. 10000 + Rs. 3000 = Rs. 13000.
Compound Interest

You might have come across statements like “one year interest for FD (fixed deposit) in thebank @9% per
annum” or ‘Savings account with interest @ 5% per annum’.
Compound interest is the interest calculated on the principal and the interest accumulated over the
previous period. It is different from simple interest, where interest is not added to the principal while
calculating the interest during the next period.
Interest varies from term 1 to term 2, Since the amount for first term will be added to the principal to
become the new principal for the second term.
If P = 10000 N = 3yrs R = 10%/a
I1 = 1000 (ஃ 10% (10000) = 1000)
I2 = 1000 + 10% (1000) = 1000+100 = 1100
I3 = 1100 + 10% (1100) = 1100+110 = 1210
CI = I1 + I2 + I3 = 1000+1100+1210 = 3310rs.

Compound Interest, CI = A - P
Formula of compound interest (C.I)
𝑅
C.I = P (1 + )nt
100
P =Principal,
T= Total time span R = Rate of interest
N = number of times interest got compounded annually

Example: A sum of Rs. 20,000 is borrowed by Heena for 2 years at an interest of 8% compounded
annually. Find the Compound Interest (C.I.) and the amount she has to pay at the end of 2years.

1. Find the Simple Interest (S.I.) for one year.

Let the principal for the first year be P1 Here, P1 = Rs. 20,000
SI1 = SI at 8% p.a. for 1st year = (Rs. 20000 × 8) /100 = Rs. 1600

2. Then find the amount which will be paid or received. This becomes principal for the next year.
Amount at the end of 1st year = P1 + SI1 = Rs. 20000 + Rs. 1600= Rs. 21600 = P1 (Principal for 2nd year).

Page 3
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
3. Again find the interest on this sum for another year.
SI2 = SI at 8% p.a .for 2nd year = (Rs. 21600 × 8)/100= Rs. 1728

4. Find the amount which has to be paid or received at the end of second year.
Amount at the end of 2nd year = P2 + SI2 = Rs. 21600 + Rs. 1728= Rs. 23328 Total interests given = Rs.
1600 + Rs. 1728= Rs. 3328

Reeta asked whether the amount would be different for simple interest. The teacher told her to find
the interest for two years and see for herself.

SI for 2 years = Rs. (20000 × 8 × 2)/100 = Rs. 3200.

Reeta said that when compound interest was used Heena would pay Rs. 128 more.

𝑅
Difference between CI and SI for 2 years = p× ( )
100
CI – SI ) 2 yrs = R% (R%(P)) ie I (I).
(Interest on Interest)
If P = 10000 N= 10% R = 2yrs
CI- SI = 10% (10 % (10000))
=100

Difference between the simple interest and the compound interest

Note that in 3 years,

Interest earned by Simple Interest = Rs. (130 – 100) = Rs. 30, whereas, Interest earned by Compound
Interest = Rs. (133.10 – 100) = Rs. 33.10
Note also that the Principal remains the same under Simple Interest, while it changes year after year
under compound interest.
Example: Find CI on Rs. 12600 for 2 years at 10% per annum compounded annually.
We have, A = P
𝑅 2
𝐴 = 𝑃(1 + )
100
Where Principal (P) = Rs. 12600, Rate (R) = 10, Number of years (n) = 2

Page 4
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
 10 2
= Rs. 12600 (1 + )
100
11 2
= Rs. 12600 ( )
100
11 11
= Rs. 12600× ×
10 10
= Rs.15246
CI = A – P = Rs. 15246 – Rs. 12600 = Rs. 2646 (or)
𝑡1 = 10% (12600) = 1260
𝑡2 = 1260 + 10% (1260) = 1260 + 126 = 1386
CI = 𝑡1 + 𝑡2 = 1260 + 1386 = 𝑅𝑠. 2646

Time period and rate when interest not compounded annually

The time period after which the interest is added each time to form a new principal is called the
conversion period. When the interest is compounded half yearly, there are two conversion periods in a
year each after 6months.
In such situations, the half yearly rate will behalf of the annual rate. What will happen if interest is
compounded quarterly? In this case, there are 4conversion periods in a year and the quarterly rate will
be one - fourth of the annual rate.
If interest is compounded half yearly, we compute the interest two times. So, time period becomes twice
and rate is taken half.
𝟏
Example: What amount is to be repaid on a loan of Rs. 12000 for 1 𝒚𝒆𝒂𝒓𝒔 at years at 10% per annum
𝟐
compounded half yearly?

Applications of Compound Interest Formula

There are some situations where we could use the formula for calculation of amount in CI. Here are
a few.
1. Increase (or decrease) in population.
2. The growth of a bacteria if the rate of growth is known.
3. The value of an item, if its price increases or decreases in the intermediate years.

Page 5
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
Example: The population of a city was 20,000 in the year 1997. It increased at the rate of 5% p.a.
Find the population at the end of the year 2000.
There is 5% increase in population every year, so every new year has new population. Thus, we can say it
is increasing in compounded form.

Population in the beginning of 1998 = 20000 (we treat this as the principal for the 1 st year)

Increase at 5% = (5/100) × 20000 = 1000

Population in 1999 = 20000 + 1000 = 21000

Increase at 5% = (5/100) × 21000 = 1050

Population in 2000 = 21000 + 1050= 22050

Increase at 5% = (5/100) × 22050 = 1102.5

At the end of 2000 the population = 22050 + 1102.5 = 23152.5

5 2
or, Population at the end of 2000 = 20000 (1 + )
100

21 21 21
=20000× × ×
20 20 20
= 23152.5
So, the estimated population = 23153.

Example: A TV was bought at a price of Rs. 21,000. After one year the value of the TV was depreciated
by 5% (Depreciation means reduction of value due to use and age of the item). Find the value of the
TV after one year.
Principal = Rs. 21,000
Reduction = 5% of Rs. 21000 per year
21000×5×1
= Rs.
100
= Rs. 1050
Value at the end of 1 year = Rs. 21000 – Rs. 1050 = Rs. 19,950
Alternately, We may directly get this as follows:
5
Value at the end of 1 year = Rs. 21000(1 − ) Type equation here.
100
19
= Rs. 21000 × 19= Rs. 19,950
20

# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040Page 6
+91 8939696868/69 [email protected] www.aramiasacademy.com
 PRACTICE QUESTIONS

1. A certain sum amounts to Rs. 29,440 in seven years at 12% p.a. on simple interest. At what rate
of interest should the same amount of money be lent to earn the same interest in six years?
a) 18%
b) 20%
c) 16%
d) 14%
Ans: D
Solution:
Interest earned in 7 years = 7 x 12% of P = 84% of P
Let interest earned in 6 years = 6 x X%
Given than 6 x X% = 84
X = 14%

2. A sum of money at simple interest amount Rs. 2514 in 3 years and Rs. 2562 in 4 years. The sum
is
a) Rs. 2070
b) Rs. 2370
c) Rs. 2730
d) Rs. 2030
Ans: B
Solution:
According to the question
SI for one year = Rs. 2562 – Rs. 2514 = 48
SI for 3 years = 48 x 3 = 144
Principle = Rs. 2514 – 144 = 2370

3. P1, P2, P3 are invested at 2%, 4%, 6% respectively such that the simple interests from all the
three at the end of the year are equal. If the sum of three investments is Rs. 3300, then find the
values of P1, P2, P3 respectively.
a) Rs. 1800, Rs.900, Rs.600
b) Rs. 1900, Rs.800, Rs.600
c) Rs. 2000, Rs.600. Rs.700
d) Rs. 1700, Rs.800, Rs,800
Ans: A
Solution:
Let invested money be Rs. X, Rs.Y and Rs. Z
According to the question
(𝑋 𝑥 2 𝑥 1)/ 100 = (𝑌 𝑥 4 𝑥 1)/ 100 =( 𝑍 𝑥6 𝑥 1)/ 100
⇒ 2𝑥 /100 = 4𝑦 /100 = 6𝑧 /100 =𝑘
⇒ X = 50k, Y = 25k, z= 50 3 𝐾
Ratio of X : Y : Z = 6 : 3 : 2
6 + 3 + 2 = 11 unit
1 unit = 3300/ 11 = 300
P1 = 6 unit = 6 x 300 = Rs. 1800
P2 = 3 unit = 3 x 300 = Rs. 900
P3 = 2 unit = 2 x 300 = Rs. 600

4. A sum of money invested at simple interest becomes 5 times itself in 16 years. If the rate of
interest is increased by 5 percentage points, in how many years will the sum becomes 7 times
itself?
a) 26 yrs
b) 28 yrs
c) 24 yrs
d) 20 yrs

Page 7
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
 Ans: D
Solution:
Given A = 5P
𝑃+ (𝑝𝑛𝑟 /100) =5𝑃
1+ (𝑛𝑟 /100) =5
𝑛𝑟 /100 =4
𝑟= (4 𝑥 100)/ 16
r = 25%
According to the questions when r = 30%
𝑃+( 𝑝𝑛𝑟/ 100) =7𝑃
1+( 𝑛𝑟/ 100) =7
1+ (𝑛30/ 100) =7
(3/ 10) 𝑛=6
𝑛= (6 𝑥 10)/ 3
𝑛=20 𝑦𝑒𝑎𝑟s

5. If the difference of compound interest and simple interest on a sum for 2 years is Rs. 30 at the
different rate of 14 2 /7 % for 1st year and 10% for 2nd year. Find the compound interest of 2 nd
year.
a) Rs. 300
b) Rs. 320
c) Rs. 240
d) Rs. 340
Ans: C
Solution:
Rate for 1st year = 14 2 /7 % = 1 7
Rate for 2nd year = 10% = 1 /10
Rate of 2 years= 1/ 7 .
Let the principle be70 x
SI CI
1ST YR 10x 10x
2ND YR 7x 8x
17x 18x
Difference = 18x – 17x = x = Rs. 30
C.I for 2nd year = 8x = 8x30 = 240

6. The simple interest and the compound interest earned at the end of two years on a certain
amount at the same rate of interest are 2400 and 2544 respectively. If the rate of interest was
4% points more, what would be the simple interest for the same period on the same sum?
a) Rs. 4200
b) Rs. 3200
c) Rs. 3600
d) Rs. 4800
Ans: B
Solution:
SI for 2 years = 2400
T1 = 1200 = I
T2 = 1200 = I
CI for 2 years = 2544
T1 = 1200 = I
T2 = 1200 → I + 144 → I (I)
I (I)% = R% = (144 /1200 )X 100% = 12%
R%/A = 12% = 1200
P = 100% = 10000
New SI = (12 + 4)% X 2 years = 32% of 10000 = 3200

Page 8
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
7. Rama invested a sum of Rs.36,000 for three years, interest being compounded annually. If the
rate of interest for the first, second and third years are 20% p.a. 15% p.a. and 10% p.a
respectively. What is the interest earned by Rama on her investment?
a) Rs. 18648
b) Rs. 16486
c) Rs. 14868
d) Rs. 18484
Ans: A
Solution:
P I
1ST 36000 7200
2ND 26400 6480
3RD 29040 4968

8. A sum of money invested at compound interest triples itself in 16 years. In how many years will
it become 27 times itself?
a) 48 yrs
b) 36 yrs
c) 24 yrs
d) 12 yrs
Ans: A
Solution:
Let the sum be P
It becomes 3pm 16 years . Further 16 years it becomes 9P
In another 16 years it becomes 27P
In 48 yrs it becomes 27P

9. Sum was split into two equal parts. One part was lent at R% pa simple interest and the other
part was lent at R% pa compound interest. Both parts were lent for 3 years. The difference in
the interest accrued on the two parts at the end of two years and at the end of three years are
in the ratio 10:31. Find R.
a) 5
b) 8
c) 10
d) 12
Ans: C
Solution:
Let the sume be 100.
First let us take the R = 10%
From the options
SI CI
1ST YR 10 10
2ND YR 10 11
3RD YR 10 12.1
30 33.1
Required ratio – difference in interest : difference in interest at the end of 3 years
=1:3:1
=10:31

10. A sum amounts to Rs. 56,000 in five years and Rs. 64,000 in six years under compound interest
compounded annually. What is the rate of interest?
a) 8.33% pa
b) 12.5% pa
c) 14.28% pa
d) 16.67 % pa
Ans: C
Solution:
Amount after 5years is 56,000 and after 6 years is 64,000

Page 9
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
 Therefore the interest on 56,000 is 8000
Annual rate of interest = 8000 /56000
=1/ 7
Therefore rate of interest is 14.28% p.a

11. A sum takes x years to double at R1% p. a S.I. If it is lent at R2% p.a C.I. interest being
compounded annually, it would take the same time to double. Which of the following is always
true if x >1?
a) R1 > R2
b) 0.5 R2 < R1< R2
c) R1 = R2
d) R2/3 < R1 < R2
Ans: A
Solution:
If a sum is doubled in the same time at simple interest as well as compound interest, the rate of
interest under simple interest is more than rate under compound interest.

12. A sum was divided into two equal parts. One part was lent at 20% pa simple interest. The other
part was lent at 20% compound interest, interest being compounded annually. The difference
in the interest fetched by the parts in the second year is ₹. 400. Find the difference in the interest
fetched by the parts in the fourth year.
a) ₹. 1414
b) ₹. 1442
c) ₹. 1456
d) ₹. 1484
Ans: C
Solution:
Let the sum be ₹. 2 p
₹. p lent at simple interest fetches 0.2 p as interest each year.
₹. p lent at CI fetches 0.24p as interest in the second year and ₹. 0.3456 p in the fourth year
0.24 p − 0.2 p = 400
p = 10000
∴ Required difference = 0.3456 p − 0.2 p = ₹. 1456

13. What is the rate of interest per annum?

1. Statements: 1. The interest is ₹, 500 for two years.
2. At twice the rate of interest, the interest for four years is ₹. 2000.
Which of the following statements are required to find the answer for the above question?
a) Statement 1 alone is sufficient
b) Statement 2 alone is sufficient
c) Both 1 and 2 together are sufficient
d) Both the statements together are not sufficient to answer
Ans: D
Solution:
The question cannot be answered by using even both the statements as the principal is not given.

14. What is the rate of Simple Interest?

Statements:
1. Total interest earned was Rs. 8500
2. Sum was invested for 6 yrs.
a) If only statement 2 is sufficient
b) If both 1 and 2 together are sufficient
c) If both 1 and 2 are sufficient to answer separately
d) If the two statement together are not sufficient
Ans: D
Solution:
Both the Statements 1 and 2 together are not sufficient to answer the question

Page 10
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com
15. What percentage rate of Simple interest per annum did Ramesh pay to Akhil? Statements:
1. Ramesh borrowed Rs. 7000 from Akhil for 4 yr.
2. Ramesh returned Rs. 7700 to Akhil at the end of 2 Years
a) If only statement 1 is sufficient
b) If only statement 2 is sufficient
c) If both 1 and 2 together are sufficient
d) If both 1 and 2 are sufficient to answer separately
Ans: C
Solution:
P = ₹, 7000, N = 2 yrs, A = 7700
Interest = 7700 – 7000 =700
S.I = PNR/ 100
700 = (7000 × 2 × 12 )/100
R = 5%
Both 1 & 2 together are sufficient to answer the question.

16. A Survey was conducted on the married persons of a certain locality. It was found that the entire
community practiced monogamy and each married person lived with his/her spouse. The
population of the locality is 6400 and 9/16th of those are males and the rest females. If 30% of
the males are married, find the percentage of married females in the locality?
7
a) 16 %
8
4
b) 38 %
7
3
c) 43 %
4
4
d) 48 %
7
Ans: B
Solution:
9
No of males = x 6400 = 3600
16
30
No of married males = x 3600 = 1080
100
No of married females = 1080
No of females = 2800
1080 4
Percentage of married females = x 100 = 38 %
2800 7

Page 11
# 23/1665, 15th Main Road, H Block, Temple View Colony, Anna Nagar West Chennai – 600 040
+91 8939696868/69 [email protected] www.aramiasacademy.com