Multiple choice general knowledge math & puzzles

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:

  1. 625

  2. 630

  3. 640

  4. 650

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Let sum = P. Simple Interest for 2 years at 4%: 2 × 0.04 × P = 0.08P. Compound Interest for 2 years at 4%: P(1.04)² - P = P(1.0816 - 1) = 0.0816P. Difference = 0.0816P - 0.08P = 0.0016P = 1. Therefore, P = 1/0.0016 = 625. Option A is correct.