Rajan Financier claims to be lending money at simple interest, but he includes the interest every six months for calculating the principle. If he is charging an interest of 20%, the effective rate of interest becomes

Options
- 22%
- 21%
- 19%
- 14%

CORRECT ANSWER : 21%

Discussion Board
Solution

Let the sum be Rs. 100.

Then:

Simple interest for first 6 months:

\implies? 100 × 20 × 1 / 100 × 2

\implies? 2000 / 200

\implies? 10

Simple interest for last 6 months:

\implies? 110 × 20 × 1 / 100 × 2

\implies? 110 × 20 / 200

\implies? 2200 / 200

\implies? Rs. 11

So:

Amount at the end of 1 year:

\implies? Rs. (100 + 10 + 11)

\implies? Rs. (100 + 21)

\implies? Rs. 121

Effective rate:

\implies? (121 - 100)

\implies? 21%

Final answer: 21%

Vicky Sahu 06-25-2021 02:21 AM

Query

How to solve this question

Poorvi 08-29-2019 01:26 AM

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