Solution
1. Interest earned and total amount after 5 years
For simple interest, we use the formula:
Interest=Principal×Rate×Time/100\text{Interest} = \text{Principal} \times \text{Rate} \times
\text{Time} / 100Interest=Principal×Rate×Time/100
● Principal (P) = 5000 dollars
● Rate (R) = 4%
● Time (T) = 5 years
Interest=5000×4×5/100=1000 dollars\text{Interest} = 5000 \times 4 \times 5 / 100 = 1000
\text{ dollars}Interest=5000×4×5/100=1000 dollars
Total amount after 5 years:
Total Amount=Principal+Interest=5000+1000=6000 dollars\text{Total Amount} =
\text{Principal} + \text{Interest} = 5000 + 1000 = 6000 \text{ dollars}Total
Amount=Principal+Interest=5000+1000=6000 dollars
2. Interest and total amount to be repaid
Using the simple interest formula again:
● Principal (P) = 20000 rupees
● Rate (R) = 6%
● Time (T) = 2 years
Interest=20000×6×2/100=2400 rupees\text{Interest} = 20000 \times 6 \times 2 / 100 = 2400
\text{ rupees}Interest=20000×6×2/100=2400 rupees
Total amount to be repaid:
Total Amount=Principal+Interest=20000+2400=22400 rupees\text{Total Amount} =
\text{Principal} + \text{Interest} = 20000 + 2400 = 22400 \text{ rupees}Total
Amount=Principal+Interest=20000+2400=22400 rupees
3. Savings account balance after 10 years with compound interest
For compound interest, we use the formula:
A=P×(1+R100)T\text{A} = \text{P} \times (1 + \frac{\text{R}}{100})^{\text{T}}A=P×(1+100R)T
● Principal (P) = 1000 pounds
● Rate (R) = 3.5%
● Time (T) = 10 years
A=1000×(1+3.5100)10=1000×(1.035)10≈1410.60 pounds\text{A} = 1000 \times (1 +
\frac{3.5}{100})^{10} = 1000 \times (1.035)^{10} \approx 1410.60 \text{
pounds}A=1000×(1+1003.5)10=1000×(1.035)10≈1410.60 pounds
4. Simple and compound interest for a company investment
● Principal (P) = 50000 dollars
● Rate (R) = 7%
● Time (T) = 3 years
Simple Interest (SI):
SI=50000×7×3/100=10500 dollars\text{SI} = 50000 \times 7 \times 3 / 100 = 10500 \text{
dollars}SI=50000×7×3/100=10500 dollars
Compound Interest (CI):
A=50000×(1+7100)3=50000×(1.07)3≈61252.15 dollars\text{A} = 50000 \times (1 +
\frac{7}{100})^3 = 50000 \times (1.07)^3 \approx 61252.15 \text{
dollars}A=50000×(1+1007)3=50000×(1.07)3≈61252.15 dollars
CI=A−Principal=61252.15−50000=11252.15 dollars\text{CI} = \text{A} - \text{Principal} =
61252.15 - 50000 = 11252.15 \text{ dollars}CI=A−Principal=61252.15−50000=11252.15
dollars
5. Total amount after 7 years with fixed deposit
Using the compound interest formula again:
● Principal (P) = 8000 euros
● Rate (R) = 5.2%
● Time (T) = 7 years
A=8000×(1+5.2100)7=8000×(1.052)7≈11422.76 euros\text{A} = 8000 \times (1 +
\frac{5.2}{100})^7 = 8000 \times (1.052)^7 \approx 11422.76 \text{
euros}A=8000×(1+1005.2)7=8000×(1.052)7≈11422.76 euros
More Description For Understanding
Let's break down each question so you can understand the steps and concepts behind them.
1. Interest earned and total amount after 5 years
● Concept: This question is about simple interest, which is a straightforward way to
calculate how much money you earn (or owe) when interest is added at a constant
rate.
● Formula: Simple interest uses the formula:
Interest=Principal×Rate×Time/100\text{Interest} = \text{Principal} \times \text{Rate}
\times \text{Time} / 100Interest=Principal×Rate×Time/100
● Explanation: Here, we plug in the principal (initial deposit) of 5000 dollars, an
interest rate of 4%, and a period of 5 years. This gives us an interest of 1000 dollars
over 5 years, bringing the total amount (principal + interest) to 6000 dollars.
● Takeaway: Simple interest only depends on the initial amount (principal), not on any
interest added over time.
2. Interest and total amount to be repaid for a loan
● Concept: Here, we’re also using simple interest to determine how much interest the
borrower needs to pay and what the final repayment amount will be.
● Formula: Same as above.
● Explanation: With a loan of 20000 rupees at 6% interest for 2 years, the interest
comes out to be 2400 rupees. Adding this to the principal gives the total amount to
repay: 22400 rupees.
● Takeaway: Loans with simple interest can be calculated using the same formula,
showing both the interest amount and total repayment.
3. Compound interest for a savings account
● Concept: This question introduces compound interest, where interest is calculated
not just on the initial amount (principal) but also on any interest accumulated over
time. This "compounding" effect makes the amount grow faster.
● Formula: Compound interest uses the formula: A=P×(1+R100)T\text{A} = \text{P}
\times \left(1 + \frac{\text{R}}{100}\right)^{\text{T}}A=P×(1+100R)T where AAA is the
final amount, PPP is the principal, RRR is the rate, and TTT is the time.
● Explanation: Starting with 1000 pounds at an interest rate of 3.5% compounded
annually, after 10 years, the account will grow to approximately 1410.60 pounds.
● Takeaway: Compound interest leads to a higher total than simple interest because it
applies interest on previously earned interest.
4. Comparing simple and compound interest for a company investment
● Concept: This question asks for both simple interest and compound interest
calculations so we can see the difference.
● Explanation: With an initial investment of 50000 dollars at 7% interest for 3 years:
○ For simple interest, we use the basic formula and find 10500 dollars.
○ For compound interest, we use the compound interest formula and find a final
amount of about 61252.15 dollars, giving an interest of about 11252.15
dollars.
● Takeaway: Compound interest accumulates more over time compared to simple
interest, especially when the time period is longer or the interest compounds
frequently.
5. Fixed deposit total after 7 years with compound interest
● Concept: This is another compound interest calculation but for a longer period (7
years), showing how compounding increases the total amount over a more extended
period.
● Explanation: Depositing 8000 euros at 5.2% interest, compounded annually, results
in approximately 11422.76 euros after 7 years.
● Takeaway: Compound interest is powerful over long periods, making it useful for
long-term savings or investments.