Discussion

The difference between simple and compound interest on a certain sum of money for 2 years at 4 percent per annum is Re.1. The sum of money is

Answer: B

\[ A = P\left(1 + \frac{R}{100}\right)^{n}, \qquad \text{CI} = A - P, \qquad \text{SI} = \frac{PRn}{100} \]

\[ \text{CI} - \text{SI} = P\left(\frac{R}{100}\right)^{2} \]

\[ 1 = P(0.04)^{2} = 0.0016P \]

\[ P = \frac{1}{0.0016} = \text{Rs. } 625 \]

Checking: SI = Rs. 50 and CI = \( 625(1.0816 - 1) = 51 \) - the Re. 1 gap is 4% of the first year's Rs. 25 of interest.

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