If in 2 years at simple interest the principal increases by 16%, what will be the compound interest earned (in Rs.) on Rs. 25,000 in 2 years at the same rate?
Answer: 4160
Explanation
Let the rate of interest be r%.
Simple interest earned on Rs. 25000 in 2 years = 25000 × 0.16 = Rs. 4000
4000 = (25000 × r × 2)/100
⇒ r = 8%
Compound interest in 2 years = 25000 [1 + 8/100]2 - 25000
⇒ 29160 - 25000 = Rs. 4160
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