Aptitude - Simple Interest - Discussion

Discussion Forum : Simple Interest - General Questions (Q.No. 7)
7.
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:
10%
10.25%
10.5%
None of these
Answer: Option
Explanation:

Let the sum be Rs. 100. Then,

S.I. for first 6 months = Rs. 100 x 10 x 1 = Rs. 5
100 x 2

S.I. for last 6 months = Rs. 105 x 10 x 1 = Rs. 5.25
100 x 2

So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25

Effective rate = (110.25 - 100) = 10.25%

Discussion:
118 comments Page 12 of 12.

Joy said:   2 years ago
Why are they multiplying denominators by 2? Please, anyone, help me by explaining.
(11)

Sonam said:   2 years ago
Here,T = 0.5 month or 1/2 month (6month)
For that, they are multiplying denominators by 2.
(23)

Jeet said:   2 years ago
The unit for rate of interest is P.C.P.A that is per-cent per annum, therefore we had calculated the effective rate of interest for 1 annum i.e. 1 year.
(2)

Nila Maity said:   2 years ago
It's very helpful for me, Thanks.
(1)

Akash S G said:   2 years ago
Why is it getting compounded even though its simple interest? Shouldn't it be;

100 * 2 * 10 / 200 also by the given logic of the question for 10 years, how will you calculate it will you keep compounding?

Anyone, explain it clearly.
(23)

Yolo said:   2 years ago
Why didn't we use (1+i)^n-1 here? Please explain.
(3)

Shima said:   1 year ago
Effective rate = [(1+(r/n))^n] - 1.
r = 10.
n = 2 (1 interest per 6 months so 2 for 1 year).
(6)

Tshering Tobgay said:   1 year ago
R = e^i-1
= e^(0.1)-1
= 1.105-1
= 0.105
= 10.5%.
(6)


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