|
|
Simple and Compound Interest - January 20, 2004
The GMAT Sample Math question for the day is from the topic Simple and Compound Interest.
Question
Ann invested a certain sum of money in a bank that paid simple interest. The amount grew to $240 at the end of 2 years. She waited for another 3 years and got a final amount of $300. What was the principal amount that she invested at the beginning?
A. $200
B. $150
C. $210
D. $175
E. Insufficient data
The correct choice is (A) and the correct answer is $200.
Explanatory Answer
The sum grew to $240 at the end of 2 years.
At the end of another 3 years, the sum grew to $300.
i.e. in 3 years, the sum grew by $60.
Therefore, each year, it grew by $20.
Sum at the end of 2 years = $240
Sum grew by $20 each year.
Hence, in the first 2 years, sum grew by 2 * 20 = $40.
Therefore, sum at the beginning of the period = Sum at the end of 2 years - $40= $240 - $40 = $200.
|
|
|
