23.
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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:
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10%
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10.25%
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10.5%
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None of these
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Answer: Option B
Explanation:
Let the sum be Rs. 100. Then,
S.I. for first 6 months = Rs.
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100 x 10 x 1
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= Rs. 5
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100 x 2
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S.I. for last 6 months = Rs.
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105 x 10 x 1
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= Rs. 5.25
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100 x 2
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So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25
Effective rate = (110.25 - 100) = 10.25%
