The difference between the compound interest and simple interest on a certain sum of money at 10% per annum for 2 years is Rs 500. Find the sum when the interest is compounded annually.

Explanation

To solve the problem step by step, we need to find the principal sum (P) when the difference between the compound interest (CI) and simple interest (SI) for 2 years at a rate of 10% per annum is Rs 500.

### Step 1: Understand the formulas
- **Simple Interest (SI)** is calculated using the formula:
\[ SI = \frac{P \times r \times t}{100} \]
where \( P \) is the principal, \( r \) is the rate of interest, and \( t \) is the time in years.
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