Calculate the compound interest on Rs. 15,625 for a period of 9 months at an annual interest rate of 16%, compounded quarterly.

Explanation

Given principal (P) is Rs. 15,625, time is 9 months which equals 3 quarters, and the annual interest rate is 16%. Since interest is compounded quarterly, the quarterly rate is 16% ÷ 4 = 4%. The amount after 3 quarters is calculated as: 15625 × (1 + 0.04)^3 = 15625 × (26/25)^3 = Rs. 17,576. The compound interest is the difference between the amount and principal: 17,576 - 15,625 = Rs. 1,951.