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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Accepted Answer

Let the sum be Rs. 100. Then,

S.I. for first 6 months = Rs.	❨	100 x 10 x 1	❩	= Rs. 5
		100 x 2

S.I. for last 6 months = Rs.	❨	105 x 10 x 1	❩	= Rs. 5.25
		100 x 2

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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