Question

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?

Answer 1

Answer:

Let the sum be Rs. 100.

Then:

Simple interest for first 6 months:

$\implies$ 100 × 10 × 1 / 100 × 2

$\implies$ 1000 / 200

$\implies$ 5

Simple interest for last 6 months:

$\implies$ 105 × 10 × 1 / 100 × 2

$\implies$ 105 × 10 / 200

$\implies$ 1050 / 200

$\implies$ Rs. 5.25

So:

Amount at the end of 1 year:

$\implies$ Rs. (100 + 5 + 5.25)

$\implies$ Rs. (100 + 10.25)

$\implies$ Rs. 110.25

Effective rate:

$\implies$ (110.25 - 100)

$\implies$ 10.25%

Final answer: 10.25%

Answer 2

Heya!

Here is ur answer....

Let,

principal amount(P)= 100

Time (T) = 6 months or 1/2 year

Rate (R) = 10%

Now,

SI for 1st 6 months

= PTR/100

= 100 x 10 x 1/100 x2

= 5

Now,

SI for last 6th months

= 105 x 10 x 1/100 x2

= 5.25

Therefore, the effective rate of interese = 10.25%

Hope it helps