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
none of these
Let the sum be Rs. 100.
S.I. for first 6 months = Rs.(100×10×1/100×2)
= Rs. 5.
S.I. for last 6 months = Rs.(105×10×1/100×2)
= Rs. 5.25.
So,amount at the end of 1 year = Rs.(100 + 5 + 5.25)= Rs.110.25
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