There is a 60% increase in an amount in 5 years at simple interest. What will be the compound interest on ₹ 6,250 for two years at the same rate of interest, when the interest is compounded yearly?

Let the rate of interest = R%

Principal amount = P

Time = 5 years

$$\Rightarrow$$  Amount = $$\frac{160}{100}P$$

$$\Rightarrow$$  P + $$\frac{P\times5\times R}{100}$$ = $$\frac{160}{100}\text{P}$$

$$\Rightarrow$$  $$\frac{P\times5\times R}{100}$$ = $$\frac{160}{100}\text{P}$$ - $$\text{P}$$

$$\Rightarrow$$  $$\frac{P\times5\times R}{100}$$ = $$\frac{60}{100}\text{P}$$

$$\Rightarrow$$  R = 12%

Compound interest on ₹ 6,250 for two years at 12% = $$6250\left(1+\frac{12}{100}\right)^2-6250$$

$$=6250\left(\frac{112}{100}\right)^2-6250$$

$$=6250\left(1.12\right)^2-6250$$

$$=6250\left(1.2544\right)-6250$$

$$=6250\left(0.2544\right)$$

$$=$$ ₹ 1590

Hence, the correct answer is Option D