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QA: Simple Interest & Compound Interest

Calender Icon CAT Registration Ends: 13th September 2023

QA: Simple Interest & Compound Interest

This year also in CAT 2022, QA (Quantitative Ability) will be a separate section. CAT Exam is scheduled to be conducted in November 2022

The Quant Section of CAT is very important for scoring good percentile. It has questions from almost all sections of Maths. Below we are providing important formulas from one such important section - Simple Interest and Compound Interest. It will be beneficial for our readers in their CAT 2022 Preparation as well as for last minute revision.

Important Formulas:

1) Principal
The money borrowed or lent out for a certain period is called the principal or the sum.
2) Interest
Extra money paid for using other's money is called interest.
3) Simple Interest (S.I.)
If the interest on a sum borrowed for certain period is reckoned uniformly, then it is called simple interest.

Let, Principal = P, Rate = R% per annum (p.a.) and Time = T Years. Then, 

  • Simple Interest = (P*R*T/100)
  • P = (100*S.I. / R*T)
  • R = (100*S.I. / P*T)
  • T = (100*S.I. / R*P)

4) Compound Interesr (C.I.)

Let Principal = P, Rate = R% per annum, Time = n years.

a) When interest is compound Annually:
Amount = P (1 + R/100)n

b) When Interest is compounded Half Yearly:
Amount = P (1 + (R/2)/100)2n

c) When Interest is compounded Quarterly:
Amount = P (1 + (R/4)/100)4n

d) When interest is compounded Annually but time is in fraction, say 3 25 years

Amount  = P ( 1 + R/100) 3*  [ 1 + (2/5)R/100]  

e) When Rates are different for different years, say  R1%, R2%, R3% for 1st, 2nd, and 3rd   year respectively.

Then Amount = P ( 1 + R1 /100) ( 1 +R2 / 100) (1 + R3 / 100)

f) Present worth of Rs. x due n years hence is given by:

Present Worth =X/((1+R/100) )

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