If the difference between simple and compound interest on a sum of money for 2 years at 5% p.a is ₹125, the sum (in ₹)is:

If the difference between simple and compound interest on a sum of money for 2 years at 5% p.a is ₹125.

Let's assume the principal amount is ₹100y.

Simple interest = $$\frac{\left(100y\times\ 5\times\ 2\right)}{100}$$

= 10y    Eq.(i)

Compound interest = 100y of (100+5)% of (100+5)% - 100y

= 100y of 105% of 105% - 100y

= $$100y\times1.05\times1.05-100y$$

= 110.25y-100y

= 10.25y    Eq.(ii)

Difference between both the interests =  Eq.(ii)- Eq.(i)

125 = 10.25y-10y

0.25y = 125

y = 500

principal amount = 100y = $$100\times500$$ = 50000