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Sort each scenario to Simple or Compound Interest.

Exercise and reference answers

Left
Simple Interest
Items
  1. Item
    Interest earned each year is constant
    Answer
    Simple Interest
  2. Item
    Principal stays the same throughout
    Answer
    Simple Interest
  3. Item
    Total = P (1 + rt/100)
    Answer
    Simple Interest
  4. Item
    Interest earned this year > last year
    Answer
    Compound Interest
  5. Item
    Interest is added to principal each cycle
    Answer
    Compound Interest
  6. Item
    Total = P (1 + r/100)ᵗ
    Answer
    Compound Interest
Right
Compound Interest
Instructions
Decide which interest model the scenario assumes.

Explanation

_Source: CAT QA Arithmetic — RS Aggarwal 'Quantitative Aptitude'_
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