The sum is invested at the simple interest payable annually. The interest in two successive years, starting from first year, was Rs. 500 and Rs. 540. Find the sum.

In simple interest, the principal remains the same each year, so the difference in interest between successive years is solely due to the time period if the rate is constant, but here the increase from Rs. 500 to Rs. 540 indicates the interest rate applied to the principal. The difference of Rs. 40 represents one year of interest on the principal, meaning the rate is 40 divided by 500, or 8%. Since the first year interest is Rs. 500 at 8%, the principal equals 500 times 100 divided by 8, which is Rs. 6250.

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