Simple and Compound Interest Worksheet

Simple and Compound Interest Worksheet
  • Page 1
 1.  
Find the simple interest earned on $2800 deposited in a bank at 2% annual interest after 5 years.
a.
$270
b.
$280
c.
$230
d.
$305


Solution:

Simple interest is the interest paid only on the original deposit or the principal.

The formula used to calculate simple interest is I = ptr, where I is the simple interest, p is the principal, t is the time in years and r is the interest rate per year.

The rate of interest is 2% = 2 / 100.
[Divide the interest rate by 100.]

I = (2800 × 5 × 2100)
[Substitute 2800 for p, 5 for t and 2 / 100 for r.]

280
[Simplify.]

The interest after 5 years is $280.


Correct answer : (2)
 2.  
Find the balance on a deposit of $818, earning 4% interest compounded semiannually for 2 years.
a.
$885.08
b.
$985.08
c.
$935.08
d.
$785.08


Solution:

For calculating the interest semiannually we must divide the interest rate by the number of interest periods.

The interest rate r, compounded semiannually is 0.04 / 2= 0.020 .

The number of payment periods t is 2 years x 2 interest periods = 4.

The formula used to calculate the balance is B = p (1 + r)t , where B is the final balance, p is the principal, r is the rate of interest and t is the number of interest periods.

= 818(1 + 0.020)4
[Substitute 818 for p, 0.020 for r and 4 for t.]

= 818(1.020)4
[Add inside the grouping symbols.]

= 885.08
[Simplify and round to nearest cent.]

The balance after 2 years is about $885.08


Correct answer : (1)
 3.  
Marissa deposited $900 in her savings account. The rate of simple interest is 5% per year. Find the balance at the end of 4 years.
a.
$720
b.
$1080
c.
$180
d.
None of the above


Solution:

Interest = p × t × r
[Use the simple interest formula.]

= 900 × 4 × 0.05
[Substitute 0.05 for 5%.]

= $180

Balance = Interest + Principal = $180 + $900 = $1080.


Correct answer : (2)
 4.  
Mrs. Olga did not pay her electricity bill of $300 for the month of July. An interest of 3% per month is charged on any unpaid bill. Find the total amount charged if Mrs. Olga pays the bill after 2 months.
a.
$309
b.
$318.27
c.
$309.27
d.
None of the above


Solution:

Interest at the end of first month = p x r x t
[Use the simple interest formula.]

= 300 x 0.03 x 1
[Substitute 0.03 for 3%.]

= $9

At the end of the first month Mrs. Olga owes 300 + 9 = $309

Interest at the end of the second month = p x r x t

[Use the simple interest formula.]

= 309 x 0.03 x 1

= $9.27
[Multiplying.]

The total amount Mrs. Olga owes after 2 months = 309 + 9.27 = $318.27


Correct answer : (2)
 5.  
Find the simple interest for 3 years at a rate of 5% on $200.
a.
$60
b.
$90
c.
$30
d.
None of the above


Solution:

Interest = p × r × t
[Use the simple interest formula.]

= 200 × 0.05 × 3
[Substitute 0.05 for 5%.]

= $30


Correct answer : (3)
 6.  
Find the balance at the end of 4 years if $10000 is deposited at the rate of 11 2% simple interest.
a.
$10610
b.
$10605
c.
$10600
d.
None of the above


Solution:

Interest = p × r × t
[Use the simple interest formula.]

= 10000 × 3200 × 4
[Substitute 3 / 200 for 11 / 2%.]

= $600
[Simplify.]

Balance = Interest + Principal

= $600 + $10000 = $10600
[Substitute the values and simplify.]


Correct answer : (3)
 7.  
A credit card company charges compound interest annually on any unpaid debts at 5%. Mr. Brian now has outstanding debt of $4200. What will be his outstanding debt 3 years from now?
a.
$4922
b.
$4822
c.
$4852
d.
$4872


Solution:

Balance = p x (1 + r)t
[Use the compound interest formula.]

= 4200 x (1 + 0.05)3
[Substitute 0.05 for 5%.]

= 4200 x 1.16
[Simplify.]

= $4872


Correct answer : (4)
 8.  
Mr. Jones deposited $8000 in a bank that pays a simple interest of 7% per year. Find the balance in his account at the end of 5 years .
a.
$10800
b.
$10300
c.
$10600
d.
$9800


Solution:

Interest = p × r × t
[Use the simple interest formula.]

= 8000 × 0.07 × 5 = $2800
[Substitute 0.07 for 7%.]

Balance = Principal + Interest

= $8000 + $2800 = $10800
[Substitute the values and add.]


Correct answer : (1)
 9.  
Chris deposited $445 in an account at his school bank, where the rate of interest is 3.4% per year. Find the balance he withdraws at the end of 2 years, if he gets a simple interest.
a.
$475.26
b.
$575.26
c.
$425.26
d.
$375.26


Solution:

Interest = p x r x t
[Use the simple interest formula.]

= 445 x 0.034 x 2 = $30.26
[Substitute 0.034 for 3.4% and simplify.]

Balance = Principal + Interest

= $445 + $30.26 = $475.26
[Substitute the values and add.]


Correct answer : (1)
 10.  
Find the balance in Mrs. Charlie's account after 6 years, if she had deposited $11000 in her account 4 years ago. The bank pays a simple interest of 8.4% annually.
a.
$21240
b.
$19240
c.
$19740
d.
$20240


Solution:

Total number of years t = 6 + 4 = 10 years.

Interest = p x r x t
[Use the simple interest formula.]

= 11000 x 0.084 x 10 = $9240
[Substitute 0.084 for 8.4% and simplify.]

Balance = Principal + Interest

= 11000 + 9240 = 20240
[Substitute the values and add.]

So, the balance in Mrs. Charlie's account after 6 years is $20240.


Correct answer : (4)

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