The simple interest on a sum of ₹50,000 at the end of two years is ₹4,000. What would be the compound interest on the same sum at the same rate for the same period ?
Principal(p) = 50000
Interest(i) = 4000
Time(t) = 2 years
Interest = $$\frac{p \times r \times t}{100}$$
r = $$\frac{4000 \times 100}{50000 \times 2}
r = 4%
Compound interest = $$p(1 + r/100)^t - p$$ = 50000(1 + 4/100)^2 - 50000$$
= 50000 \times (104/100) \times (104/100) - 50000 = 54080 - 50000
= 4080
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