What is the compound interest on ₹4,250 for 2 years at 20% per year, compounded annually?

💡 Solution & Explanation

Year 1 interest = 20% of ₹4,250 = ₹850, so the amount becomes ₹5,100. Year 2 interest = 20% of ₹5,100 = ₹1,020. Total compound interest = ₹1,870. Simple interest would be only ₹1,700; the extra is interest earned on the first year's interest.