ution!!<P>

The concept of compound interest has to be used here. The principal, rate of interest and time is given. We have to find the compound interest. LET's find it without the formula first!!

For 1st year

Principal (P) = Rs 16000

Time (T) = 2 year

yearRate of interest (R) = 5%

Interest = (P × R × T)/100

Interest = (16000 × 5 × 1)/100

Interest = Rs 800

Amount = Principal + Interest

Amount = Rs 16000 + Rs 800

Amount = Rs 16800

The amount in the 1st year is the principal of the 2nd year.

For 2nd year

Principal (P) = Rs 16800

Time (T) = 1 year

Rate of interest (R) = 5%

Interest = (P × R × T)/100

Interest = (16800 × 5 × 1)/100

Interest = Rs 840

Amount = Principal + Interest

Amount = Rs 16800 + Rs 840

Amount = Rs 17640

Compound interest = Rs 800 + Rs 840

Compound interest = Rs 1640

Now, let's solve this using formula!!

Principal (P) = Rs 16000

Time (N) = 2 year

Rate of interest (R) = 5%

Amount = P(1 + (R/100))²

Here 2 is the time (n).

Amount = 16000(1 + (5/100))²

Amount = 16000(105/100)²

Amount = 16000(21/20)²

Amount = 16000 × (21/20) × (21/20)

Amount = 160 × (21/2) × (21/2)

Amount = 40 × 21 × 21

Amount = Rs 17640

CI = Amount - Principal

CI = Rs 17640 - Rs 16000

CI = Rs 1640

Compound interest = Rs 1640