What is the compound interest on ₹61,200 for 2 years at 5% per year, compounded annually?

💡 Solution & Explanation

Year 1 interest = 5% of ₹61,200 = ₹3,060, so the amount becomes ₹64,260. Year 2 interest = 5% of ₹64,260 = ₹3,213. Total compound interest = ₹6,273. Simple interest would be only ₹6,120; the extra is interest earned on the first year's interest.