## Compound interest MCQ

What is compound interest?

A) Interest earned on the initial principal only

B) Interest earned on the principal and the previous interest

C) Interest earned on the final amount only

D) Interest earned at a fixed rate

Answer: B) Interest earned on the principal and the previous interest

Which formula represents the compound interest?

A) I = PRT

B) I = P(1 + R)^T

C) I = P + RT

D) I = P / (1 + RT)

Answer: B) I = P(1 + R)^T

A principal amount of $5000 is invested at an annual interest rate of 6% compounded annually. What will be the value of the investment after 3 years?

A) $5300

B) $5450

C) $5660

D) $5790

Answer: C) $5660

At what rate of interest will a principal amount double in 5 years, compounded annually?

A) 5%

B) 10%

C) 15%

D) 20%

Answer: B) 10%

The compound interest on a certain amount for 2 years at 8% per annum compounded annually is $324. What is the principal amount?

A) $3000

B) $3200

C) $3300

D) $3400

Answer: B) $3200

How many compounding periods are there in a year if interest is compounded semiannually?

A) 1

B) 2

C) 4

D) 12

Answer: B) 2

A principal amount of $2000 is invested at an annual interest rate of 5% compounded semiannually. What will be the value of the investment after 2 years?

A) $2200

B) $2205

C) $2210

D) $2215

Answer: C) $2210

At what rate of interest will a principal amount triple in 10 years, compounded annually?

A) 8.33%

B) 10%

C) 11.11%

D) 12.5%

Answer: C) 11.11%

The compound interest on a certain amount for 3 years at 6% per annum compounded annually is $419. What is the principal amount?

A) $3500

B) $3600

C) $3700

D) $3800

Answer: C) $3700

How many compounding periods are there in a year if interest is compounded quarterly?

A) 1

B) 2

C) 4

D) 12

Answer: C) 4

A principal amount of $8000 is invested at an annual interest rate of 4% compounded quarterly. What will be the value of the investment after 4 years?

A) $8736

B) $8792

C) $8856

D) $8920

Answer: C) $8856

At what rate of interest will a principal amount quadruple in 20 years, compounded annually?

A) 4%

B) 5%

C) 6%

D) 7%

Answer: C) 6%

The compound interest on a certain amount for 4 years at 7% per annum compounded annually is $750. What is the principal amount?

A) $2500

B) $3000

C) $3500

D) $4000

Answer: D) $4000

How many compounding periods are there in a year if interest is compounded monthly?

A) 1

B) 2

C) 4

D) 12

Answer: D) 12

A principal amount of $10000 is invested at an annual interest rate of 3% compounded monthly. What will be the value of the investment after 5 years?

A) $11592.76

B) $11623.43

C) $11654.87

D) $11686.98

Answer: B) $11623.43

At what rate of interest will a principal amount quintuple in 25 years, compounded annually?

A) 4%

B) 5%

C) 6%

D) 7%

Answer: B) 5%

The compound interest on a certain amount for 5 years at 8% per annum compounded annually is $1920. What is the principal amount?

A) $4000

B) $4500

C) $5000

D) $5500

Answer: C) $5000

How many compounding periods are there in a year if interest is compounded daily?

A) 1

B) 2

C) 4

D) 365

Answer: D) 365

A principal amount of $15000 is invested at an annual interest rate of 2% compounded daily. What will be the value of the investment after 3 years?

A) $15716.96

B) $15744.29

C) $15771.58

D) $15798.82

Answer: C) $15771.58

At what rate of interest will a principal amount double in 8 years, compounded annually?

A) 7.5%

B) 8%

C) 8.5%

D) 9%

Answer: A) 7.5%

The compound interest on a certain amount for 6 years at 9% per annum compounded annually is $3499. What is the principal amount?

A) $6000

B) $6500

C) $7000

D) $7500

Answer: D) $7500

How many compounding periods are there in a year if interest is compounded continuously?

A) 1

B) 2

C) 4

D) Infinite

Answer: D) Infinite

A principal amount of $25000 is invested at an annual interest rate of 1.5% compounded continuously. What will be the value of the investment after 4 years?

A) $25719.04

B) $25731.20

C) $25743.39

D) $25755.62

Answer: C) $25743.39