[CAT- QA] Simple Interest – How to solve problems – Shortcuts and Tricks

This portion can help you to solve few easier problems as the questions are relatively easier from simple interest section.
So lets 1st check out what is Simple Interest and how it is relevant to CAT/ MBA Exams.

When you borrow money from someone or some organisation it comes up with an interest. No one will give you money for free. Since you want money at the present moment and you don’t have it now. But you know that you will get money within a year from your business or Job, what you do is to borrow money from your friends or banks as loans. The borrower has to pay an extra amount on the amount he/she has borrowed. So to repay the loan he/she will be paying an interest.

There are 2 different ways to calculate interest :
1.) Simple Interest – An interest calculated uniformly on principal at a regular fixed interval.
2.) Compound Interest – An interest which is compounded at regular fixed interval for interest calculation.

We are here to discuss simple interest and will cover up compound interest in our next article.
[CAT- QA] Compound Interest – How to solve problems – Shortcuts and Tricks

Lets first discuss the basic terms related to simple interest, its importance in CAT/MBA Exams and notations used in general usage:
1. Lender or Borrower : The person giving the money is called the lender and the person taking the money is called borrower.

2. Principal (or the sum) : The money borrowed or lent out for a certain period. It is denoted by P for calculations

3. Interest : The extra money paid by the borrower to the owner (lender) as a form of compensation for the use of the money borrowed.

4. Simple Interest (SI) : If the interest on a sum borrowed for certain period is calculated uniformly, it is called simple interest(SI).

5. Amount (A) : The total of the sum borrowed and the interest is called the amount and is denoted by A.

Well if there is a statement “rate of interest 10% per annum”, it means that the interest for one year on a sum of Rs.100 is Rs.10.
If not stated explicitly, rate of interest is assumed to be for one year.

Now comes the simple basic formula used in calculations :
Simple Interest (SI) = P x R x T/100

where P = Principal
R = Rate of Interest
T = Time in years

So what we derive from this is if we want to calculate P or R or T in different problems with other parameters specified and SI is given, we can use following formulas. Though I suggest you to remember and use only the basic formula

so,

P = SI x 100 / R / T

R = SI x 100 / P / T

T = SI x 100 / P / R

These formula are just the derivation of basic formula and need not be remembered for CAT/MBA Exams.

There are many other derivations also based on certain conditions for e.g. If simple interest of money becomes N times in T years or The annual installment which will discharge a debt of D due in T years etc.. but it is not at all required. Just stick to basic formula and solve as many problems as possible and try to improve your speed and accuracy.

Check List of Questions asked in previous CAT papers (for which paper was allowed to be shared. For the last few years CAT doesn’t allow to share the questions in forum etc. Lets respect it.)

Q.1 . How much time will it take for an amount of Rs. 800 to yield Rs. 64 as interest at 4% per annum of simple interest?
a. 2 years
b. 1 year
c. 3 years
d. 4 years

Q2. Meena took a loan of Rs. 1400 with simple interest for as many years as the rate of interest. If she paid Rs.686 as interest at the end of the loan period, what was the rate of interest?
a. 8%
b. 6%
c. 4%
d. 7%

Q3. A sum of money at simple interest amounts to Rs. 815 in 3 years and to Rs. 854 in 4 years. The sum is :
A. Rs. 700
B. Rs. 690
C. Rs. 650
D. Rs. 698

Q4. A sum fetched a total simple interest of Rs. 929.20 at the rate of 8% p.a. in 5 years. What is the sum?

A. Rs. 2323
B. Rs. 1223
C. Rs. 2563
D. Rs. 2353

Q5. Mr. Theraja invested an amount of Rs. 13,900 divided in two different schemes A and B at the simple interest rate of 14% p.a. and 11% p.a. respectively. If the total amount of simple interest earned in 2 years be Rs. 3508, what was the amount invested in Scheme B?

A. Rs. 6400
B. Rs. 7200
C. Rs. 6500
D. Rs. 7500

Check out more questions in forum :

A list of questions from forum is provided below :

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