A jeweler claims to be lending money at simple interest but he includes the interest every six...........

Quantitative Aptitude ( CCS) Simple Interest

A jeweler 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:

10%

10.25%

12.25%

9.25%

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Explanation:

Let the sum be Rs. 100. Then,
S.I. for first 6 months = Rs. ((100 ×10 ×1)/(100 ×2))=Rs.5
S.I. for last 6 months = Rs. ((105 ×10 ×1)/(100 ×2))=Rs.5.25
So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25
Effective rate = (110.25 - 100) = 10.25%