Compound interest can be calculated using the simple interest formula.
To do this the amount for the previous year becomes the principal for the succeeding year.
The Formula
Masaba borrowed Sh 120 000 from a commercial bank. He paid the loan in 2 years.
The bank charges compound interest at the rate 18% per annum.
Calculate the amount paid.
Using the formula I = P x (R/100) x T
1st year interest =120 000 x (18/100) x 1
Amount = 120 000 + 21 600 = 141 600
2nd year interest = 141 600 x (18/100) x 1 = Sh 25 488
Total interest = Sh 21 600 + Sh 25 488 = Sh 47 088
Amount = 1st year principal + total interest
= Sh 120 000 + Sh 47 088
= Sh 167 088
1. Suleiman deposited sh 2000 in a bank which gave compound interest at the rate of 10 % per annum. At the end of 1 and a half years, he withdrew all his money. How much money did he withdraw?
A. Sh 2310 B. Sh 2420 C. Sh 2300 D. Sh 2200
2. Onyancha deposited sh 1000 in a bank that pays compound interest at the rate of 10 % p.a. Onyancha collected all his money at the end of two years. What was the total interest earned?
A. Sh 100 B. Sh 200 C. Sh 110 D. Sh 210
3. Njuguna deposited sh 500 in a bank that paid compound interest at the rate of 15 % per annum. What was the total interest for the two years?
A. Sh 161.25 B. Sh 150.00 C. Sh 661.25 D. Sh 650.25
4. Aziz deposited sh 12000 in a bank that paid compound interest at the rate of 10 % per annum. If he withdrew all the interest that had been earned during the first two years, how much did he withdraw?
A. Sh 1200 B. Sh 1320 C. Sh 2400 D. Sh 2520
5. Chebii deposited sh 2000 in a bank that paid compound interest at the rate of 15 % per annum. What was the total amount in the bank at the end of two years?
A. Sh 2300 B. Sh 2645 C. Sh 2600 D. Sh 645
6. Njoroge deposited sh 5000 in a bank that paid compound interest at the rate of 16 % per annum. How much interest had his money earned at the end of two years?
A. Sh 800 B. Sh 1600 C. Sh 1728 D. Sh 928
7. Korir deposited sh 2000 in a bank that paid compound interest at the rate of 20 % per annum. If Korir withdrew all the money at the end of 1 1/2 years, how much money did he withdraw?
A. Sh 2880 B. Sh 2640 C. Sh 2600 D. Sh 640
8. A business woman deposited sh 10000 in a bank that paid a compound interest at the rate of 10 % p.a. At the end of one year, she withdrew sh 4000. What was the amount she had in the bank at the end of the second year?
A. Sh 7000 B. Sh 7700 C. Sh 1700 D. Sh 8100
9. A money lender charges compound interest at the rate of 25 % per month. He lent out sh 3000 and was repaid all the money plus interest after two months. How much money did he get all together?
A. Sh 1687.50 B. Sh 3125.00 C. Sh 4500.00 D. Sh 4687.50
