The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 4% per annum is Re. 1. The sum (in Rs.) is:

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Question:
The difference between simple and compound interests compounded annually on a certain sum of money for 2 years at 4% per annum is Re. 1. The sum (in Rs.) is:

[A].

625

[B].

630

[C].

640

[D].

650

Answer: Option A

Explanation:

Let the sum be Rs. x. Then,

C.I. = x 1 + 4 2 – x = 676 x – x = 51 x.
100 625 625
S.I. = x x 4 x 2 = 2x .
100 25
51x – 2x = 1
625 25

x = 625.