A financier lend money at simple interest but he includes the interest every six months for calculat...........

Quantitative Aptitude ( CCS) Simple Interest

A financier lend money at simple interest, but he includes the interest every six months for calculating the principal. If he is changing an interest of 10%, the effective rate of interest becomes?

10%

11.5%

10.25%

12%

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Explanation:

Solution:
Let the sum be Rs. 100. Then,
S.I. for first 6 months = (100 * 10 * 1/2)/ 100] = Rs.5
Next 6 months 10% of 5 is Rs 2 is added.
S.I. for last 6 months =Rs.[(102 * 10 * 1/2)/100] = Rs.5.25
So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25
R = (110.25 – 100) = 10.25%