Simple & Compound Interest and carry high importance in management entrance exams like CAT, XAT, NMAT. It is an integral part of the Arithmetic chapter, and it also holds great relevance in other sections like Data Interpretation in these entrance exams. Prior understanding of percentages and percentage calculation is a must to study this chapter. The fast percentage calculation speed will help you in solving questions on interests each time. Students can expect at least 1-3 questions from Simple and Compound Interest. Hence, if you are planning to go for all kinds of management exams – Simple and Compound Interest chapter has high importance in mathematics too.
Below you will find Simple Interest questions and questions on Compound Interest that came in previous years’ CAT papers.
Answer:
Let assume its equal after N years
Veeru’s investment after N years = 10000 + 10000 × (5/100) × N
Joy’s investment after N years = 8000 + 8000 × (10/100) × (N – 2)
Equating both
10000 + 10000 × (5/100) × N = 8000 + 8000 × (10/100) ×(N – 2)
10000 + 500N = 8000 + 800N – 1600
3600 = 300N
N = 12
Answer:
P (1.05) 2 – P = CI
P × 3 × 3/100 = SI
CI = 0.1025 P
SI = 0.09 P
CI – SI = 0.0125 P = 125/10000 P = 1125
P = 90000
Answer:
Total amount invested by Amal = 12000 (1+0.08) + 10000 (1 + 0.06/2) ^ 2 = 12960 + 10609 = 23569
Bimal invests p amount at SI
So, interest for bimal = p * 7.5 * 1/100
Interest are same for a and b, so we get
23569 – 22000 = p * 7.5 * 1/100
So, p = 20920
Answer:
Let each instalment be ₹x. Equating the present value of both the instalments to the money borrowed,
(x/1.1) + (x/1.12) = 210000
x = 121000
Interest is the amount charged from the borrower by the lender on the principal loan sum. Interest is the cost of renting money and the rate at which interest is charged on the principal sum which is known as the interest rate. The interest rate charged depends on two factors:
The above two reasons become the basis of why interest rates are so relevant and important at the same time have a great effect on markets and the economy and forms an integral & important part of the curriculum in the MBA or PGDM programs. But, a relatively simpler level of questions is asked in the CAT, XAT, NMAT and other management exams based on the concepts learned at the time of high school.
These concepts are categorized into a type of interests:
Let us first understand the concept of simple interest, It is a type of interest which once credited does not earn interest on itself and remains fixed over time.
The formula to calculate Simple Interest is
SI = {(P x R x T)/ 100}
Where
P = Principal Sum (the deposited amount or original loan)
R = rate of interest (the rate at which loan is charged)
T = Time period (the duration for which money is borrowed or deposited)
So, If the amount of P is borrowed at the rate of interest R for the period of T years then the amount to be repaid to the lender will be given by
A = P + SI
Suppose If rate to interest is r1% for T1 years, r2% for T2 years …. rn for Tn years for investment and the Simple Interest obtained is ₹x on the investment. Then the principal amount is given by
x * 100 / (r1T1 + r2T2 + …+ rnTn)
If a person deposits a sum of ₹X at r1% p.a. and the sum of ₹Y at r2% p.a. then the rate of interest for the sum deposited is given by
R = {(Xr1 + Yr2) / (X + 1)}
If a certain sum of money becomes “a” time in “T years” at Simple Interest, then the rate of interest p.a. is
R = 100 (a – 1) / T
Suppose a certain amount of money is lent out in n parts in such a way that an equal sum of money is available at simple interest on each part at the given interest rates at R1, R2, …, Rn respectively, and periods are mentioned as T1, T2, …, Tn respectively, then the ratio in which the sum that will be divided into n parts is given by
1 / R1T1: 1 / R2T2….: 1 / RnTn
Simple Interest and Compound Interest questions forms the important part of Arithmetic which has good contribution in the Quants section of CAT, XAT, SNAP, NMAT and other various management entrance exams. We will divide the preparation of this topic into three phases following which can help the aspirants to score exceptionally well in the management entrance exams.
In Phase I, the candidate can start with basic concept understanding and should try solving the basic simple interest and compound interest problems. For this aspirant can follow MBAP CAT E-book (Concept Theory) study material and after following the concept, they can solve the questions under Level of Difficulty 1 from the topic.
In Phase II aspirants can start practicing problems on simple interest and compound interest from Level of difficulty 2 questions. They can use MBAP Live Lecture Recording (Basic) for understanding the basic concepts and also practice through the sectional test as time-based practice and analysis of the test is also necessary by this time. Following this is very necessary to have a strong hold on Simple and Compound Interest topic.
In Phase III aspirants can practice interest questions from previous year papers of prominent management entrance exams like CAT, XAT, SNAP, NMAT, and use MBAP CAT E-book (Practice Questions). Aspirants can also practice through a mock test and analyze it thoroughly. Also, in this phase aspirants should use MBAP lecture assignments for practice and also go through the concepts once again at the same time should try solving advanced problems from Simple and Compound Interest and Linear equations.
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