Question

An automobile financier claims to be lending money at S.I., but he includes the interest every six months for calculating the principal. If he is charging an interest of 8%, the effective rate of interest becomes

Answer 1

Solution:

Let the sum be Rs. 100.

Then:

Simple interest for first 6 months:

$\implies$ (100 × 8 × 1) / (100 × 2)

$\implies$ (100 × 8) / (200)

$\implies$ 800 / 200

$\implies$ Rs. 4

Simple interest for last 6 months:

$\implies$ (104 × 8 × 1) / (100 × 2)

$\implies$ (104 × 8) / (200)

$\implies$ 832 / 200

$\implies$ Rs. 4.16

So:

Amount at the end of 1 year:

$\implies$ (100 + 4 + 4.16)

$\implies$ (100 + 8.16)

$\implies$ Rs. 108.16

Effective rate:

$\implies$ 108.16 - 100

$\implies$ 8.16%

Final answer: 8.16%

Answer 2

Heya!

Here is ur answer...

Let,

principal amount=100

Time = 6 months (or) 1/2 year

Rate = 8%

Now,

SI for first six months

= PTR /100

= 100 x 8 x1/100x2

= 4%

And,

SI for last six months

= 104 x8 x 1/100 x 2

= 4.16%

Therefore, the effective interest = 4+4.16 = 8.16%

Hope it helps