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.