A sum of money was invested at simple interest at a certain rate for 5 years. Had it been invested at a 5% higher rate, it would have fetched Rs. 500 more. What was the principal amount?

Using the simple interest formula, the extra interest generated by the higher rate is calculated as Original Principal multiplied by the extra rate multiplied by the time divided by 100. Substituting the given values gives 500 equals P times 5 times 5 divided by 100. This simplifies to 500 equals 0.25 times P. Solving for P gives 500 divided by 0.25, resulting in a principal amount of Rs. 2,000.

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