What will be the compound interest on a sum of Rs. 1875 after 2 years if the rate of interest for the first year is 4% and that for the second year is 8%?
Answer: 231
Explanation
To calculate the compound interest, we need to calculate the interest for each year and add it to the principal.
Year 1:
Principal = Rs. 1875
Rate = 4%
Interest = (1875 x 4)/100 = Rs. 75
Amount = Principal + Interest = 1875 + 75 = Rs. 1950
Year 2:
Principal = Rs. 1950 (amount after 1st year)
Rate = 8%
Interest = (1950 x 8)/100 = Rs. 156
Amount = Principal + Interest = 1950 + 156 = Rs. 2106
Now, let's calculate the compound interest:
Compound Interest = Amount - Principal = 2106 - 1875 = Rs. 231
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