The simple interest on a certain sum for two years at the rate of 20% per annum is ₹250. What is the compound interest (compounded annually) on the same sum for the same period at the same rate of interest?

₹275

We know ,

Simple Interest = \(\frac{Principal ×Rate × Time }{100}\)

250 = \(\frac{Principal × 20 × 2 }{100}\) 

Principal = 625

With Compound interest , Amount = Principal × ( 1 + \(\frac{r }{100}\))²

= 625 × ( 1 + \(\frac{20 }{100}\))²

= 625 × ( 1 + \(\frac{1 }{5}\))²

= 625 × \(\frac{6 }{5}\) × \(\frac{6 }{5}\) 

= 900

Amount = Principal + Compound Interest

Compound Interest = 900 - 625 = 275