An automobile financier claims to be lending money at simple interest, but he includes the interest every six… · ABC26GN4039
Subject: General Aptitude · Chapter: Simple Interest
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
(a)10\%
(b)10.25\%
(c)10.5\%
(d)None of these
Answer
Answer (as printed): B
Explanation
Let the sum be ₹ 100. Then, S.I. for first 6 months $=₹\left(\frac{100 \times 10 \times 1}{100 \times 2}\right)=₹ 5$. S.I. for last 6 months $=₹\left(\frac{105 \times 10 \times 1}{100 \times 2}\right)=₹ 5.25$. So, amount at the end of 1 year $=₹(100+5+5.25)$ = ₹ 110.25. ∴ Effective rate $=(110.25-100)=10.25 \%$.
Explanation as extracted from the printed page; notation may be imperfect.