Compound Interest Practice Test Set 1

Work backward from the final payment. The debt immediately before the end-of-third-year payment grew at 10% to ₹13,310, so the debt after the second-year deposit was 13,310/1.10 = ₹12,100 .

Add back the ₹8,470 deposit made at the end of year 2. The debt just before that deposit was 12,100 + 8,470 = ₹20,570 .

Given $P =$ ₹15,000, rate = 15% and time = 2 years. The two-year amount factor is 1.15² = 1.3225.

Compound interest percentage = 1.3225 - 1 = 0.3225, or 32.25%.

The rate is 30% in the first year, so the first-year growth factor is 1.30.

The second-year rate is 40%, so the second-year growth factor is 1.40.

For 2 years at 32%, the amount factor is 1.32² = 1.7424.

Therefore, compound interest = P $\times (1.7424 - 1) = 0.7424P$.

Quarterly compounding means 4 periods per year. The quarterly rate is 16%/4 = 4%.

Six months contain 2 quarters. Amount factor = 1.04² = 1.0816.