Simple and Compound Interest
Interest represents the cost of borrowing money or the return on investment. TU CMAT frequently tests Simple Interest and Compound Interest concepts in financial math problems.
Practice MCQs for Simple and Compound Interest
Fundamental Principles
Principal (P)
The initial amount of money borrowed or invested.
Rate (R)
The percentage of interest charged or earned per year.
Time (T)
The duration for which money is borrowed or invested, usually in years.
Simple Interest (SI)
Interest calculated only on the original principal amount.
Compound Interest (CI)
Interest calculated on both principal and previously earned interest.
Essential Formulation Tips
- Always convert rate into decimal form carefully.
- For SI, ignore previous interest accumulation.
- For CI, calculate year-by-year if needed.
- Use approximation for fast CMAT solving.
Shortcut Execution Techniques
- Difference between CI and SI (2 years): CI - SI = (P × R²) / 100²
- For small rates, CI ≈ SI + small extra amount
- Use power expansion for quick CI estimation
- Break multi-year CI stepwise if exponent is large
Contextual Inquiries (FAQs)
Q: Which is more beneficial, SI or CI?
A: For borrowers SI is better; for investors CI is better.
Q: Why does CI grow faster than SI?
A: Because interest is calculated on accumulated interest as well.
Q: When is CI used in real life?
A: Loans, bank savings, investments, and fixed deposits.
Example Breakdown: Simple Interest Basic
Basic CMAT SI questionSI = (P × R × T) / 100
SI = (1000 × 5 × 2) / 100
SI = 100
Example Breakdown: Compound Interest Basic
Very common CMAT questionA = 1000(1 + 10/100)^2
A = 1000 × 1.21 = 1210
CI = 1210 - 1000 = 210
Example Breakdown: Difference between CI and SI
High-frequency exam trickSI = 200
CI = 210
Difference = 10
Example Breakdown: Time-based SI
CMAT algebra-based SI questionSI = (P × R × T) / 100
300 = (1500 × 5 × T)/100
T = 4 years
CMAT Simple Interest Basics Set 1
Fundamental Simple Interest formula-based questions.
Q1. Find Simple Interest on Rs. 1000 at 5% per annum for 2 years.
Q2. Find SI on Rs. 2000 at 10% per annum for 1 year.
Q3. Find SI on Rs. 1500 at 4% per annum for 3 years.
Q4. What is the formula of Simple Interest?
Q5. Find SI on Rs. 5000 at 2% per annum for 2 years.
Q6. If SI = 300, P = 1000, R = 10%, find time.
Q7. SI on Rs. 2500 at 8% for 1 year is:
Q8. If principal increases, SI will:
Q9. SI depends on:
Q10. If rate doubles, SI will: