SI & CI I

If we go through the past years CAT papers which are in public domain, it becomes apparent that hardly
any question from SI/CI was asked during the period 2000 to 2008. But due to increased weightage of
arithmetic in the new avatar of CAT, questions from the topic have made appearance in various slots of last
few years CAT exams after a long hiatus.

Key concepts discussed:

Pr n
100

Simple Interest (S.I.) =

nr

Amount in case of S.I. = P 1 +

100

Amount in case of C.I. (interest being compounded annually) = P 1 +

100

12
/k
Amount in case of C.I. (interest being compounded every k months) = 1 +
100

Present value (P) in case of S.I. =

Present value (P) in case of C.I. =

Installment value =

Doubling period = 72 , where r 15% and margin of error is less than 5%.
r

12
k

A
nr

1 +

100

A
r

1 + 100

P r
100
100 1

100 + r

Highlight: This session deals with questions which are based on elementary concepts of SI/CI. Most of
the questions in the session are of easy to moderate difficulty level.

Session

SI & CI

The questions discussed in the session are given below along with their source.
Q1.

A sum of money compounded annually becomes Rs.625 in two years and Rs.675 in three years.
The rate of interest per annum is
(a) 7%
(b) 8%
(c) 6%
(d) 5%
(CAT 1991)

DIRECTION for Question 2: The question is followed by two statements. As the answer,
Mark (a), if the question can be answered with the help of statement I alone,
Mark (b), if the question can be answered with the help of statement II, alone,
Mark (c), if both, statement I and statement II are needed to answer the question, and
Mark (d), if the question cannot be answered even with the help of both the statements.
Q2.

Little Beau Peep lost her sheep. She couldnt remember how many were there. She knew she
would have 400 more next year, than the number of sheep she had last year. How many sheep were
there?
I. The number of sheep last year was 20% more than the year before that and this simple rate of
increase continues to be the same for the next 10 years.
II. The increase is compounded annually.
(CAT 1994)

Q3.

A man earns 6% SI on his deposits in Bank A while he earns 8% SI on his deposits in Bank B. If the
total interest he earns is Rs.1800 in three years on an investment of Rs.9000, what is the amount
invested at 6 %?
(a) Rs.3000
(b) Rs.6000
(c) Rs.4000
(d) Rs.4500
(SNAP 2007)

Q4.

Mungeri Lal has two investment plans- A and B, to choose from, Plan A offers interest of 10%
compounded annually while plan B offers interest of 12% per annum. Till how many years is plan B
a better investment?
(a) 3
(b) 4
(c) 5
(d) 6
(e) 7
(XAT 2009)

Q5.

Mr. Jeevan wanted to give some amount of money to his two children, so that although today they
may not be using it, in the future the money would be of use to them. He divides a sum of Rs.
18,750/- between his two sons of age 10 years and 13 years respectively in such a way that each
would receive the same amount at 3% p.a. compound interest when he attains the age of 30 years.
What would be the original share of the younger son?
(a) 8959.80
(b) 8559.80
(c) 8369.80
(d) 8795.80
(IIFT 2008-10)

Q6.

Mr. Mishra invested Rs. 25,000 in two fixed deposits X and Y offering compound interest
@ 6% per annum and 8% per annum respectively. If the total amount of interest accrued in two
years through both fixed deposits is Rs. 3518, the amount invested in Scheme X is
(a) Rs. 12,000

(b) Rs. 13,500

(c) Rs. 15,000

(d) Cannot be determined

(IIFT 2013-15)

SI & CI

Session