Simple & Compound Interest Most Expected Questions For SBI Clerk 2024 Exam

Simple and Compound Interest For SBI Clerk 2024 Exam: Interest calculation forms a part of the crux of financial mathematics, one of the important subjects of SBI Clerk. Understanding the topic will not only help you score well but will also make your hold on basic financial transactions quite robust, which would always be helpful if you aim to have a banking career. Let’s dig deeper into the basics of simple and compound interest, essential formulas, and types of questions you can expect in SBI Clerk Prelims 2024.

What is Simple and Compound Interest

Simple Interest (SI)

This interest type is simple interest where a sum of money bears the interest charged on that sum for the period under which it has been lent or invested. The interest will not compound since the amount of principal that has acquired the interest during a specified time period is not added to the principal to earn the next amount of interest.

Where:

• P = Principal (initial amount)
• R = Rate of Interest per annum
• T = Time (in years)

Compound Interest

Compound interest is the one that works both on the initial principal amount and on the interest that had already accumulated in the previous periods. This is an important concept that makes interest accumulate, over time, and generate returns much more than in the case of simple interest.

Where:

• A = Total Amount (principal + interest) after T years
• P = Principal
• R = Rate of Interest per annum
• T = Time (in years)

Simple & Compound Formula

Compound interest:
Interest = Amount – Principal

If Rs. ‘P’ is invested at a rate of ‘r%’ p.a. compounded annually for ‘t’ years, then the amount received after ‘t’ years will be = P × {1 + (r/100)}^t

If the interest is not compounded annually, then

Effective rate of interest = Actual rate ÷ Number of times the interest is compounded in a year

Effective time period = Actual time period × Number of times the interest is compounded in a year

Simple interest:

If Rs. ‘P’ is invested at simple interest of ‘r%’ p.a. for ‘t’ years, then the amount received after ‘t’ years will be = P + {(P × r × t)/100}

And, the simple interest received = {(P × r × t)/100}

Relationship between simple interest (SI) and compound interest (CI):

When a principal (P) is invested at the rate of ‘r%’ p.a., then

Difference between SI and CI after two years = P × (r/100)² 

Difference between SI and CI after three years = P × (r/100)² × {(r/100) + 3}

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Simple & Compound Interest Most Expected Questions PDF

Question 1: When Rs. (x + 500) is invested at 20% p.a. compound interest, compounded annually for 2
years, the interest received is Rs. 660. Find the interest received when Rs. (x – 500) is invested at 25%
p.a. simple interest for 6 years.
A) Rs. 750
B) Rs. 840
C) Rs. 600
D) Rs. 900
E) Rs. 510

Question 2: Rs. 3200 is invested at 35% p.a. simple interest for 4 years in scheme A. The interest
received from scheme A is then invested for 2 years at 50% p.a. compound interest, compounded
annually in scheme B. Find the interest received from scheme B.
A) Rs. 5400
B) Rs. 5600
C) Rs. 5800
D) Rs. 6000
E) None of these

Question 3: Rs. 3600 is invested at 15% p.a. simple interest for 6 years. How much sum should be
invested to receive Rs. 900 less interest at same rate of simple interest and in the same duration?
A) Rs. 2500
B) Rs. 2800
C) Rs. 2600
D) Rs. 3200
E) Rs. 3000

Simple & Compound Interest Most Expected Questions PDF Link

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Simple & Compound Interest Most Expected Questions FAQ