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Home Aptitude Compound Interest Comments

  • Question
  • Find the effective rate of interest for an investment that earns 5 1/2% per year, compounded continuously


  • Options
  • A. 5.65%
  • B. 5.75%
  • C. 5.85%
  • D. 5.95%

  • Correct Answer
  • 5.65% 

    Explanation

    We are not given a value of P in this problem, so either pick a value

    for P and stick with that throughout the problem, or just let P = P.

    We have that t = 1, and r = .055. To find the effective rate of interest,

    first find out how much money we have after one year:

    A = Pert

    A = Pe(.055)(1)

    A = 1.056541P.

    Therefore, after 1 year, whatever the principal was, we now have 1.056541P.

    Next, find out how much interest was earned, I, by subtracting the initial amount of money from the final amount:

    I = A ? P

      = 1.056541P ? P

      = .056541P.

    Finally, to find the effective rate of interest, use the simple interest formula, I = Prt. So,

    I = Pr(1) = .056541P

    .056541 = r.

    Therefore, the effective rate of interest is 5.65%

  • Tags: Bank Exams, Bank PO

    Compound Interest problems


    Search Results


    • 1. What will be compounded amount? I. Rs. 200 was borrowed for 192 months at 6% compounded annually. II. Rs. 200 was borrowed for 16 years at 6%.

    • Options
    • A. I alone sufficient while II alone not sufficient to answer
    • B. II alone sufficient while I alone not sufficient to answer
    • C. Either I or II alone sufficient to answer
    • D. Both I and II are not sufficient to answer
    • Discuss
    • 2. The compound interest on Rs. 30,000 at 7% per annum is Rs. 4347. The period (in years) is

    • Options
    • A. 2years
    • B. 3years
    • C. 4years
    • D. 5years
    • Discuss
    • 3. If the simple interest on a sum of money at 5% per annum for 3 years is Rs. 1200, find the compound interest on the same sum for the same period at the same rate.

    • Options
    • A. Rs.1251
    • B. Rs.1261
    • C. Rs.1271
    • D. Rs,1281
    • Discuss
    • 4. The compound interest earned in two years at 12% per annum is Rs 10176. What is the sum (in Rs) invested?

    • Options
    • A. 50000
    • B. 60000
    • C. 40000
    • D. 80000
    • Discuss
    • 5. The compound interest on Rs. 24000 at 10% per annum for 11?2 years, interest being compounded semiannually is

    • Options
    • A. Rs.3783
    • B. Rs.3777
    • C. Rs.3780
    • D. Rs.3781
    • Discuss
    • 6. Josh borrowed $250 from his mother to buy an electric scooter. Josh will pay her back in 1 year with 3% simple annual interest. How much interest will Josh pay?

    • Options
    • A. 7.50
    • B. 8.50
    • C. 9.50
    • D. 10.50
    • Discuss
    • 7. The effective annual rate of interest corresponding to nominal rate of 6% per annum payable half yearly is

    • Options
    • A. 5%
    • B. 6%
    • C. 7%
    • D. 6.09%
    • Discuss
    • 8. Find the time to double your investment at 6%

    • Options
    • A. 10years
    • B. 11years
    • C. 12years
    • D. 13years
    • Discuss
    • 9. Mr. and Mrs. Espedido?s property taxes, amounting to $2450, are due on July 1.What amount should the city accept if the taxes are paid eight months in advance and the city can earn 6% compounded monthly on surplus funds?

    • Options
    • A. 2354.17
    • B. 2354
    • C. 2376
    • D. 2389
    • Discuss
    • 10. Two payments of $10,000 each must be made one year and four years from now. If money can earn 9% compounded monthly, what single payment two years from now would be equivalent to the two scheduled payments?

    • Options
    • A. 17296
    • B. 13296
    • C. 19296
    • D. 15296
    • Discuss


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