The simple interest on a sum of ₹50,000 at the end of two years is ₹4,000. What would be the compound interest on the same sum at the same rate for the same period ?

₹4,080

By using formulas,

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

4000 = \(\frac{50000 ×Rate × 2 }{100}\)

4 = \(\frac{50× Rate}{50}\)

Rate = 4%

In case of compound interest ,

Amount = Principal×  ( 1 + \(\frac{r }{100 }\) )^t

Amount = 5000×  ( 1 + \(\frac{4 }{100 }\) )²

= 500-0×  ( 1 + \(\frac{1 }{25 }\) )²

= 50000 × \(\frac{26 }{25 }\) × \(\frac{26 }{25 }\) 

= 54080

Now , Amount = Principal + Compound Interest

54080 = 50000 + Compound Interest 

Compound Interest = 54080 - 50000

= 4080