A certain amount of money becomes ? 944 in three years by earning simple interest. If the rate of interest is increased by25%, the amount would become ? 980 during the same period. What was the principal amount ?

The correct answer is (a) ` 600.

Let P be the principal amount.

The simple interest for 3 years is 944 – P.

The simple interest for 3 years at 25% higher rate is 980 – P.

The simple interest is proportional to the principal amount and the rate of interest and the time period.

So, we have the following equations:

944 – P = (P)(R)(3)

980 – P =

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