Question

Calculate effective rate of interest if car financier lending money at SI, but includes interest every six months for calculating principal rate $10$%

• A. $10.25$%
• B. $10.025$%
• C. $10$%
• D. None

Answer 1

Answer: (B)

$10.025$%

Let sum be $Rs.100$
SI for first 6 months $=\frac{100\times 10\times 1}{2\times 100}$
SI fro last 6 months $=\frac{105\times 10\times 1}{1\times 100}=\frac{105}{20}=5.025$
Amount at end of one year $=Rs.100+5+5.025$
$=Rs.110.025$
Effective Rate $=110.25-100=10.025$%