The difference between the compound and the simple interests on a certain sum of money for two years, at 5% per annum, is ₹1. The sum is:

Correct option is C

Given:
Difference between compound interest (CI) and simple interest (SI) for 2 years = ₹1
Rate of interest = 5% p.a.

Formula Used:
Difference between CI and SI for 2 years = P × (R/100)², where P is the principal and R is the rate.

Solution:
1 = P × (5/100)²
1 = P × (25/10000)
​P = 1 × 10000 / 25
P = ₹400