A man gets a simple interest of Rs.500 on a certain principal at the rate of 5% p.a in two years. Find the compound interest the man will get on twice the principal in two years at the same rate.

A. Rs.500
B. Rs.250
C. Rs.5012.50
D. Rs.5062.50
E. None of these.
Explanation:
Let the principal be Rs.P
S.I at 5% p.a in 8 years on Rs.P = Rs.500
(P)(8)(5)/100 = 500
P = 1250
C.I on Rs.2P i.e., Rs.2500 at 5% p.a in two years
=2500{ [1 + 5/100]2 – 1} = 2500{ 212 – 202 /202}
= 2500/400(441 – 400)
= 25/4(41) = 1025/4 = Rs.256.25