The difference between the simple and the compound interest on a certain sum of money at 4% per annum in 2 years is Rs. 10. What is the sum?

- Rs. 5,500
- Rs. 6,000
- Rs. 6,250
- Rs. 7,500

**Answer**

Let the principle sum be Rs. P.

Assume P to be Rs.1,000.

Simple Interest (SI) = (P × 4 × 2)/100 = 8P/100 = Rs.80

Compound Interest (CI) = First year interest + second year interest

CI = Rs.40 + Rs.41.60 = Rs.81.60

The difference between SI and CI is Rs.1.60 at P = Rs.1,000

For difference to be Rs.10,

P = 1000/1.6 × 10 = Rs.6,250

**The correct option is C.**