GMAT Quant Practice | Simple Interest Q17

GMAT Sample Questions | Word Problem

The given question is a GMAT 550 level problem solving question from the topic Simple Interest. It tests the concept of finding principal invested based on data about interest earned.

Question 17: 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

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Explanatory Answer | GMAT Simple Interest

Concept: Simple interest earned remains same year after year.

At the end of 2 years:Value of investment (Amount) = $240
At the end of another 3 years:Value of investment (Amount) = $300
In 3 years, the sum grew by $60.
So interest for 3 years = $60.
Because Ann invested in simple interest, interest earned each year = $20.

Interest earned in the first 2 years = 2 × 20 = $40.
Therefore, principal = Sum at the end of 2 years - $40 = $240 - $40 = $200.
Principal invested $200

Choice A is the correct answer.

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