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Shouldn't we divide the two-digit code by 2 factorial and similarly three digit code by 3 factorial to eliminate repetition of the same letters like AAA or BBB etc? Even though repetition is allowed, we can't possibly shift these letters to make a new code.

3 or 2 similar letters won't repeat; take a small example of 2 letters A and B => we get 2*2 = 4 different arrangements, viz. AA, AB, BA, BB. Similarly for 26 letters, you would get different no. of arrangements, you won't need to divide.
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