The difference between simple and compound interests compounded

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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. 620
2. 630
3. 640
4. 625

Correct Option: D

Here , Difference = C.I. - S.I. = ₹ 1 , Time = 2 years , Rate = 4%
Let the principal be Rs. P.
We can find required answer with the help of given formula ,

For 2 years , C.I. – S.I. =	PR²
	10000

⇒ 1 =	P × 4 × 4
	10000

⇒ P =	10000	= Rs. 625
	4 × 4