The simple interest on a sum deposited at 10% p.a. for 4 years is ₹20,000. What will be the compound interest on the same sum at half of the above rate of interest for 2 years, interest compounded yearly?

₹5,125

The formula that we used here is :-

Simple interest = \(\frac{P × R × T}{100}\)

20000 = \(\frac{P × 10 × 4}{100}\)

P = Rs. 50000

Now,

New rate = \(\frac{10}{2}\)% = 5%

C.I = P(1+$\frac{R}{100})^t$– P

= 50000 [ 1 + \(\frac{5}{100}\) ]² - 50000

= 50000 × \(\frac{21}{20}\) × \(\frac{21}{20}\) - 50000

= 55125 - 50000

= 5125