Interest: The Resource Center

Interest
The Resource Center

Interest Earned is
Proportional to
Interest = R * P * T
100
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If Rs 8,000 is invested at
6 percent simple annual
interest, how much
interest is earned after 3
months?
Rs 120.
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The simple interest on a
sum of money is 2/5 of
th
the sum in 5 years. What

is the simple interest?
(0.4 / 5) * 100 = 8%
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How long does it take for
Rs 2500 to become Rs
10,000 at 10% simple
interest?
30 Years
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The property tax was
reduced by 20%. X’s
property appreciated by
20% during this period.
What is the effect on the
tax that X pays?
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let R be rate of tax
P be value of property
Initial property tax = RP
New property tax = 0.8R*1.2P
= 0.96 RP
so tax decreased by 4 %
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A sum was put at simple
interest at a certain rate
for 4 years. Had it been
put at 2% higher rate, it
would have fetched Rs 56
more. Find the sum
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Interest for 4 years = 4Px / 100.
If the rate is increased by 2%,

the new interest :
4P(x+2) / 100.
[4P(x+2)] / 100 - [4P(x)] / 100
= 4P*2 / 100 = Rs 56.
So P = 56 * 100 / ( 4 * 2) =
Rs 700.
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Rs 3,800 are lent out in 2
parts in such a way that
the interest on part P at
8% for 5 years is equal to
that on part Q at ½ % for
15 years. Find P.
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So P x 8 x 5 = Q x ½ x 15.
Therefore
P : Q = 15 / ( 2 x 8 x 5 ) = 3 :
16.
P : P + Q = 3 : 19 Also P + Q =
3800. So P = 3800 x 3/ 19
= Rs 600.
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A deposits Rs 2,000 in her
savings account at at 4%
and Rs 3,000 at 14% p.a.
Find the rate of interest for
the whole sum.
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Interest @ 4% = Rs 0.04 x
2000 = Rs 80
Interest @ 14% = Rs 0.14 x
3000 = Rs 420
Total interest income = 500.
Total principal = 5000.
Rate on total amount =
500 / 5000 = 10%
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Compound Interest
Interest on Interest
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What sum of money lent
out at compound interest
will amount to Rs 968 in 2
years at 10% p.a., interest
being charged annually?
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An amount of x will become
1.1x in 1 year at 10% interest.
In 2 years time it will become
1.1*1.1 x = 1.21 x. So,
1.21 x = 968. Therefore,
x = 968 / 1.21 = 800
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Compound Interest
= P ( 1 + r/100)t
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The value of a machine
depreciates 10% every
year. If the present value
is 4500, what was the
value 2 years earlier?
(4500/0.9)/0.9 = 5555.
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How much did the
machine cost if its
depreciated value was
5100 at the end of the 1 st
year and 4335 at the end

of the 2 year?
nd
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A = P ( 1 – r/100) n
5100 = P ( 1 - r/100 )
4335 = P ( 1 - r/100 ) 2
4335/ 5100 = ( 1 - r/100)

Solving we get r = 15
Hence the original amount was
6000
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A sum of money invested
@ CI, compounded
annually, amounts to 7840
in a year and 8780.80 in 2
years. What is the original
sum of money?
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A = P ( 1 + r/100 ) n
7840 = P ( 1 + r/100 )
8780.8 = P ( 1 + r/100 ) 2
8780.8/ 7840 = ( 1 + r/100)

Solving we get r = 12
Hence the original amount was
7000
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A, with a 2-year time frame,
can invest either at 20% or
in a share that pays 26% in
1 year and 14% in 2 .
st nd
Which is better?
1.2*1.2 is > 1.26*1.14
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If Rs 10,000 is invested at
10 % CI, compounded
semiannually, what is the
balance after 1 year?
10,500 + (10,500)(0.05)
= 11,025
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A sum of money is
invested at CI payable
annually. The interest in
successive years were Rs
225 and Rs 238.50. Find
the interest rate p.a.
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Interest in two consecutive
years was 225 and 238.5.
Therefore interest on Rs 225
for 1 year = 238 – 225 = 13.50.
Principal = 225, interest = 13.5,
time = 1 year Rate =
13.5/225 = 6% p.a.
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A man borrows Rs. 6000
at 3% CI. If he repays
Rs.1200 at the end of
each year, find the
outstanding at the
beginning of the 6 year.
th
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At the end of each year
Yr Amount Amt+Int O/s
1 6000 6180 4980
2 4980 5129 3929
3 3929 4047 2847
4 2847 2932 1732
5 1732 1785 585
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A sum of money is
accumulating at x% CI. If
SI is used instead, the
interest for the first 2
years would decrease by
Rs 20 and for first 3 years,
by Rs 61. Find x.
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Interest differential1
= [P(1+r)  P] – (2Pr) = 20
2
Interest differential2
= [P (1 + r)  P ] – ( 3Pr) = 61.
3
Solving the two, Pr = 1. Also,

3
Pr = Pr x r = 1.
3 2
Hence, r = 1/ 20 = 5%.
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Interest

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the sum in 5 years. What

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If the rate is increased by 2%,

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year and 4335 at the end

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4335/ 5100 = ( 1 - r/100)

8780.8/ 7840 = ( 1 + r/100)

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Solving the two, Pr = 1. Also,

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