Explanation:

- He borrowed a sum and repaid it in two instalments, with each instalment amounting to Rs3,025.

- The interest rate involved is 10% per annum, compounded annually.

- To determine the borrowed amount, consider that the borrowed sum will appreciate at an annual rate of 10% before each instalment reduces it.

- To solve: Suppose the sum borrowed is 'P'. After one year with interest, the sum becomes P x (1 + 0.10).

- Upon paying the first instalment of Rs3,025, the remaining amount will appreciate again at the rate of 10%, and he pays the second instalment to settle the entire debt.

- Calculations should reveal the correct borrowed sum.

The correct option is:

Option 1: Rs5,575

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