What is the compound interest on ₹1600 at 25% per annum of 2 year compounded annually

- ₹ 900
- ₹ 800
- ₹ 750
- ₹ 700

Compound interest = P (1 + i)^{n} - P, where

P is the principal amount

i is the rate of interest (not in percentage)

n is the time period

So, CI = 1600(1 + 0.25)^{2} - 1600

= 1600 × 1.5625 - 1600

= 2500 - 1600 = ₹ 900

**The correct option is A.**

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