What is the compound interest on ₹1600 at 25% per annum

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

  1. ₹ 900
  2. ₹ 800
  3. ₹ 750
  4. ₹ 700

Answer

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.