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You are here: Home » GMAT Test Prep Questions » Simple & Compound Interest » Question 3

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?

1. $ 200
2. $ 150
3. $ 210
4. $ 175
5. 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.