A sum of money is invested at a rate of compounded interest that is paid out yearly. In the first two years, the interest was ₹400 and ₹420 respectively. The sum is:

₹8,000

Difference in interest = 420 - 400 = Rs. 20

Rate = \(\frac{ 20 }{400}\) × 100%

= 5%

Now,

For 1st year , Interest on Sum = 400

So, 5% = 400

Sum = 100% = \(\frac{ 400 }{5}\) × 100

= Rs. 8000