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Question
Simple interest on a sum of money for 2 years at \[6\frac{1}{2} %\] per annum is Rs 5200. What will be the compound interest on the sum at the same rate for the same period?
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Solution
\[P = \frac{SI \times 100}{RT}\]
\[ \therefore P = \frac{5, 200 \times 100}{6 . 5 \times 2}\]
\[ = 40, 000\]
Now,
\[A = P \left( 1 + \frac{R}{100} \right)^n \]
\[ = 40, 000 \left( 1 + \frac{6 . 5}{100} \right)^2 \]
\[ = 40, 000 \left( 1 . 065 \right)^2 \]
\[ = 45, 369\]
Also,
CI = A - P
= 45, 369 - 40, 000
= 5, 369
Thus, the required compound interest is Rs 5, 369.
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