An automobile financier claims to be lending money at simple interest…

Question

An automobile financier claims to be lending money at simple interest, but he includes the interest every six months for calculating the principal. If he is charging an interest of 10%, the effective rate of interest be…

Accepted Answer

Option B. 10.25%. Answer & Solution Answer: Option B Solution: & Let\, the\, sum\, be\, Rs .\, 100 .\, Then, & S .I .\, for\, first\, 6\, months & = Rs.\, ( 100 × 10 × 1100 × 2 ) & = Rs.\,5 & S .I .\, for\, last\, 6\, months & = Rs.\, ( 105 × 10 × 1100 × 2 ) & = Rs.\,5.25 So, amount at the end of…

An automobile financier claims to be lending money at simple interest, but he includes the interest every six months for calculating the principal. If he is charging an interest of 10%, the effective rate of interest becomes:

Solution