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:
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.
Yashi said:
5 years ago
@Susmita.
Why we take principal 100 for 1 year it is 105 when we calculate the rate in the last?
Why we take principal 100 for 1 year it is 105 when we calculate the rate in the last?
Psit Kanpur said:
5 years ago
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 // How 105?
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%.
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 // How 105?
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%.
Shubham said:
5 years ago
It is simple and not compound interest, so effective interest rate should be 10% only.
Raghav said:
5 years ago
The effective interest rate should be 10% only and not 10. 25% since it is simple and not compound interest! Correct me If I am wrong.
Shrawan singh said:
5 years ago
The principal should be 100. It's simple interest not compound interest that interest will be calculated on total amount.
Jayashree said:
5 years ago
@Lakshmy answer.
Why should we divide total S.I by 100/x, can you help me out for this?
Why should we divide total S.I by 100/x, can you help me out for this?
M.s.Kumar said:
5 years ago
Easy and clear explanation, Thanks @Saiteja.
Nitish said:
5 years ago
Do effective rate of interest mean interest for 1 year?
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