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Question:

A sum of ₹5,000 was deposited for 3 years at 10% per annum, compounded annually. The difference between the interest for 2 years and that for 3 years is:

Explanation:

Interest for 2 years = 5,000${\left(1+\frac{10}{100}\right)}^2$ - 5000 = 6050 - 5000 = Rs. 1,050

Interest for 3 years = 5,000${\left(1+\frac{10}{100}\right)}^3$ - 5000 = 6655 - 5000 = Rs. 1,655

Difference in interest for 3 years and 2 years = 1655 - 1050 = Rs. 605

Hence, option (b).