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Compound interest can be calculated using the following formula:

$\text{CI=P$\left ( 1+\frac{r}{n}\right )^{nt}-P$}$

where;

  • CI= compound interest
  • P= principal amount $(Rs.2500)$
  • r= rate of interest $(4\%)$
  • n=no. of times the interest is compounded annually (2 year)

$\text{$\therefore$CI=2500$\left (1+\frac{4}{100} \right )^2$-2500}$

$\text{CI=2500*$\frac{26*26}{25*25}$-2500}$

$\text{CI=2704-2500=204}$

Option (B) is correct.

 

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