The question given below is a problem solving question in Simple Interest.
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?
- $ 200
- $ 150
- $ 210
- $ 175
- Insufficient data
The correct choice is (A) and the correct answer is $ 200
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.