August 10, 2024
Overview: Discover the art of mastering compound interest for NID 2025. This guide breaks down complex concepts into simple strategies, helping you excel in your exam preparation. Dive in and unlock the secrets of financial success!
Compound Interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest. In simple terms, we can say that when you get interested in your invested money and interest in that money.
Simple interest means when you get interested in your principal amount only. But compound interest is the interest on the principal sum and the interest earned.
In this article, you will learn all the tips to solve Compound Interest Questions for NID 2025 and some solved Compound interest questions for NID Entrance Exam 2025.
Interest is the additional money paid by organisations like banks or post offices on money deposited (kept) with them. Interest is also paid by people when they borrow money. When the interest is calculated on the previous year’s amount, the interest is called compounded or Compound Interest (C.I.).
The formula for finding the amount on compound interest is given by -
Where,
A = amount
P = principal
r = rate of interest
n = number of times interest is compounded per year
t = time (in years)
Alternatively, we can write the formula as given below:
CI = A – P
Where,
A = P[1 +(R/100)]nt
This formula is also called periodic compounding formula.
Compound Interest is an extension of Simple Interest. If you have understood the topic of simple interest thoroughly, you can easily understand the topic of compound interest and score good marks in the NID entrance exam.
Compound interest keeps on adding the interest generated in the principal amount. So, in compound interest is that the principal keeps on getting updated yearly.
Compound interest is used to calculate appreciation, depreciation of assets, decrease or increase of population, etc.
Some of the significant question types which are asked in simple interest and compound interest are as follows: -
Know More: How to Solve Simple Interest Questions for NID 2025
The following are some of the tips that will help enhance your NID exam preparation.
Know More: Previous year exam analysis for NID entrance exam
Question: A bank charges a rate of interest of 10% compounded annually. What is the total amount to be paid on a loan of Rs. 36000 for three years?
Solution:
Given:
Rate of Interest = 10% compounded annually
Principal amount = Rs. 36000
Time = 3 years
To find: the interest amount to be paid in 3 years
Solution :
Principal amount = 36000
Simple interest for three years
Interest amount = Principal x rate of interest x Time
Interest Amount = 36000 x 10% x 3 years
Interest Amount = 36000 x 10/100 x 3
Interest Amount = 10800
Therefore, the simple interest amount for three years will be Rs. 10800, and each year will be Rs. 3600.
Compound interest for three years
Amount = {1 + Rate/100} áµ€
Know More: Important questions with answers for the NID CAT exam
For finding the compound interest -
We will calculate interest for three years.
10% of 36000 = 3600
Rs. 3600 will be the interest every year.
10% of 3600 for 2nd-year compound interest, i.e. 360
So, the 2nd year interest is 3600 + 360 = 3960
For the 3rd year, 10% interest on 3600 of the 1st year and 3600 of the 2nd year
i.e. 10% of 7200, i.e. 720.
And 10% interest of 360, i.e. 36
So, the 3rd year interest is 3600 + 720 + 36 = 4356
Compound interest (CI) = 3600 (1st year) + 3960 (2nd year) + 4356 (3rd year) = 11916
Compound interest (CI) = 11916
To find the final amount -
Amount = Principal + Compound Interest
Amount = 36000 + 11916
Amount = 47916
Know More: NID Exam Pattern 2025 Marking Scheme
Question: If P = 10000/-, T = 2 years 6 months, rate of interest = 20% compounded annually. Find Amount.
Solution:
We will calculate interest for three years.
20% of 10000, i.e. Rs. 2000
Rs. 2000 will be the interest.
20% of 2000 for 2nd-year compound interest, is 400
So, the 2nd year interest is 2000 + 400 = 2400
For the 3rd year, 20% interest on 2000 of 1st year and 2000 of 2nd year,
i.e. 20% of 4000, i.e. 800.
And 20% interest of 400, i.e. 80.
So, we will take interest of 2 years total and half interest of 3rd year
Compound interest (CI) = 2000 (1st year) + 2400 (2nd year) + 1440 (6 months) = 5840.
Compound interest (CI) = 5840.
Amount = Principal + Compound Interest
Amount = 10000 + 5840
Amount = 15840
Know More: Best study timetable to enhance your NID preparation
Question: If P = 20,000, Rate of Interest = 3% p.a. Time = 2 years three months, Find Compound interest.
Solution:
3% of 20000, i.e. Rs. 600
Rs. 600 will be the interest every year
3% of 600 for 2nd-year compound interest, is 18
So, the 2nd year interest is 600 + 18 = 618
For the 3rd year, 3% interest on 600 of the 1st year and 600 of the 2nd year,
i.e. 3% of 1200, i.e. 36.
And 3% interest of 18, i.e. 0.54.
So, we will take interest of 2 years total and 1/4th interest of 3rd year
Compound interest (CI) = 600 (1st year) + 618 (2nd year) + 159.135 (3 months) = 1377.135
Compound Interest (CI) = 1377.135
Know More: Important questions for the NID CAT exam
Question: If P = 7.30 lacs, Rate of Interest = 10% p.a. T = two years and two days. Find Compound Interest.
Solution:
10% of 7,30,000, i.e. Rs. 73000
Rs. 73000 will be the interest every year
10% of 73000 for 2nd-year compound interest, i.e. 7300
So, the 2nd year interest is 73000 + 7300 = 80300
For the 3rd year, 10% interest on 73000 of the 1st year and 73000 of the 2nd year,
i.e. 10% of 1,46,000, i.e. 14600.
And 10% interest of 7300, i.e. 730.
So, we will take interest of 2 years total and two days interest of 3rd year.
Compound interest (CI) = 73000 (1st year) + 80300 (2nd year) + 484 (2 days) = 1,53,784
Compound Interest (CI) = 1,53,784
Question: If P = 18000, Rate of Interest = 16.66%, Time = 1 year 73 days, Find Compound Interest.
Solution:
16.66% (1/6) of 18000, i.e. Rs. 3000
Then we will write in the boxes mentioned below
Rs. 3000 will be the interest every year
16.66% (1/6) of 3000 for 2nd-year compound interest, i.e. 500
So, the 2nd year interest is 3000 + 500 = 3500
So, we will take interest of 1 year full and 73 days interest of 2nd year
Compound interest (CI) = 3000 (1st year) + 700 (73 days) = 3700
Compound Interest (CI) = 3700
Question: If P = 10400, Rate of Interest = 5%, Time = 1 year and six weeks, interest compounded annually.
Solution:
5% of 10400, i.e. Rs. 520
Rs. 520 will be the interest every year
5% of 520 for 2nd-year compound interest, i.e. 26
So, the 2nd year interest is 520 + 26 = 546
So, we will take interest of 1 year full and six weeks interest in 2nd year.
Compound interest (CI) = 520 (1st year) + 63 (6 weeks) = 583
Compound Interest (CI) = 583
Know More: Important questions for the NID GAT exam
Question: The differences between Simple interest and compound interest on a certain sum of money at 5% for two years are Rs. 3. Find the sum.
Solution:
For 2 years, the difference between CI and SI is given by the formula:
Difference = (P * R^2) / (100^2)
Substituting the given values:
3 = (P * 5^2) / (100^2)
Simplifying:
3 = (P * 25) / 10000
Solving for P:
P = (3 * 10000) / 25
P = 1200
Therefore, the sum is Rs. 1200.
Know More: How to prepare for NID studio test?
Question: If the difference between Compound interest and simple interest on a certain sum of money at 5% p.a. for three years is Rs. 122. Find the sum.
Solution:
For 3 years, the difference between CI and SI is given by the formula:
Difference = P * (R/100)^2 * (300 + R) / 100
Substituting the given values:
122 = P * (5/100)^2 * (305/100)
Simplifying:
122 = P * (25/10000) * (305/100)
Solving for P:
P = (122 * 10000 * 100) / (25 * 305)
P = 16000
Therefore, the sum is Rs. 16000.
Question: Simple interest on a sum of money for two years is Rs. 480, and Compound interest is Rs. 492. Find the sum and rate of interest.
Solution:
Time = 2 years
Simple interest = Rs. 480
Compound Interest = Rs. 492
To Find the Sum and Rate of Interest.
We have simple interest, i.e. Rs. 480
So, this simple interest is for two years,
So, 240 is the simple interest.
And we have compound interest also, i.e. Rs. 492.
Rate of interest,
=) 240 * R/100 = 12
=) R = 5%
Rate of interest = 5%
Principal amount,
=) P * R/100 = SI of 1 year
=) P * 5/100 = 240
=) P * 1/20 = 240
=) P = 240 * 20
=) P = 4800
So,
Principal amount = Rs. 4800
And the rate of interest = 5%
Know More: NID Interview Questions with Answers 2025
Question: A man borrowed Rs.80000 at 10% p.a. compound interest, interest being compounded annually. How small should he have repaid at the end of the first year if he can clear the loan by repaying Rs.55000 at the end of the second year?
Answer: 1. Rs. 38000
Explanation:
Principal= 80000
Rate of interest = 10 % ‘
after the first-year amount = 88000
10 % rate compounded annually
If we paid 55000 at the end of the 2nd year, we paid 110 % of the amount left after paying particular from the 1st year. CI is always calculated on the previous year's amount.
=55000/110 * 100
= 50000
So that a certain amount is paid after the first year, the remaining amount equals 50000.
i.e. the certain amount paid after 1st year is equal to the
= 88000-50000
= 38000
Question: A specific loan amount, compounded under compound interest annually, earns an interest of Rs.1980 in the second year and Rs.2178 in the third year. How much interest did it make in the first year?
Answer: 2. Rs. 1800
Explanation:
Interest in 2nd year = 1980 Rs.
Interest in 3rd year = 2178 Rs.
Difference=2178-1980=198
Rae of interest = (198/1980)*100
= 10%
If the rate of interest is 10 % compounded annually, then the interest in the second year is 11 %
It means 1980 is 11%, and we have to calculate the first year, i.e. we have to calculate 10 % of p
The interest of 1st year = 1980/11*10
= 180*10
= Rs. 1800/-
Know More: NID DAT Exam Analysis 2025
Question: A sum of money is lent at a certain interest rate at compound interest. If instead, the same amount was lent at simple interest, the interest for the first two years reduces by Rs.160 and that for the first three years reduces by Rs.488. Find the sum
Answer: 4. Rs. 64000
Explanation:
B is the difference B/w 2 years of interest So B = 160
Difference B/w 3 years of C. I and S.I.
= 3B+C = 488
160*3+C = 8
C is calculated on 8
Rate = 8/160*100 = 5%
A = 160/5*100 = 3200
P = 3200/5*100
P = Rs. 64,000
Know More: How to Prepare for NID in 6 Months?
Frequently Asked Questions
How long does it take for NID Exam Preparation?
Which book is best for NID preparation?
Can I crack NID Exam in 3 months?
How Can I manage time in NID Exam?
Is NID exam easy?
How much time should I keep aside for revision in the NID Exam Preparation plan?