Correct Answer - Option 1 : Rs. 62.5

**Given:**

The principal is Rs. 25,000

Rate is 5% per annum

Time is 2 years

**Formula used:**

SI - CI = P(R/100)^{2}

where SI = Simple Interest, CI = Compound interest, P = Principal, R = Rate

**Calculations:**

Principal is Rs. 25,000

Rate is 5% per annum

Difference between the compound interest and simple interest is

⇒ SI - CI = P(R/100)2

⇒ SI - CI = 25,000 × (5/100)^{2}

⇒ SI - CI = (25,000 × 25)/10,000

⇒ SI - CI = 6,25,000/10,000

⇒ SI - CI = 62.5

**∴ The Difference between the compound interest and simple interest is Rs. 62.5**