If the simple interest on a sum of money for 2 years at 5% per annum is Rs. 50, what will be the compound interest on the same sum at the same rate for the same time?
Explanation:
Simple Interest for 1 year = 50 / 2 = Rs. 25. Compound interest for 2 years includes the simple interest plus interest on the first year's interest. Extra interest = 5% of 25 = Rs. 1.25. Total compound interest = 50 + 1.25 = Rs. 51.25.
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