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-

A 10%

B 10.25%

C 10.75%

D 11%

Solution

Correct Answer: Option B

Let the sum be BDT 100. Then,

S.I. for first 6 months = (100 x 10 x1)/(100 x 2)= BDT 5

S.I. for second 6 months = (105x10x1)/(100 x 2)= BDT 5.25

So, amount at the end of 1 year =

Solution

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