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:

₹605

From the formula for compound interest, we know,

C.I = P(1+$\frac{R}{100})^t$– P

CI for 2 years,

= 5000 [ 1 + \(\frac{10}{100}\) ]² - 5000

= 5000 [ \(\frac{11}{10}\) × \(\frac{11}{10}\) - 1 ]

= 5000 [ \(\frac{21}{100}\) ]

= 1050

CI for 3 years,

= 5000 [ 1 + \(\frac{10}{100}\) ]³ - 5000

= 5000 [ \(\frac{11}{10}\) × \(\frac{11}{10}\) × \(\frac{11}{10}\) - 1 ]

= 5000 [ \(\frac{331}{1000}\) ]

= 1655

Required difference = 1655 - 1050

= Rs. 605