A principal amount yields Rs. 50 as simple interest over 2 years at an annual rate of 5%. What will be the compound interest earned on the same principal, rate, and time period?

Explanation

The simple interest for 2 years at 5% per annum is Rs. 50, so the principal (P) can be calculated as P = (Simple Interest * 100) / (Rate * Time) = (50 * 100) / (5 * 2) = Rs. 500. Using the compound interest formula CI = P[(1 + r/100)^t - 1], we get CI = 500[(1 + 0.05)^2 - 1] = 500(1.1025 - 1) = 500 * 0.1025 = Rs. 51.25.