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 8 of 12.
Ramesh said:
9 years ago
Why has he taken 10% interest rate instead of taking 6 months interest rate?
Time is taken for 6 months but interest is not taken for 6 months.
Time is taken for 6 months but interest is not taken for 6 months.
Ramesh yadav said:
9 years ago
@Ramesh
10% means 10 for every 100 only, and 10% p.a means 10 for every 100 per annum but they did not mention 10% p.a in question.
10% means 10 for every 100 only, and 10% p.a means 10 for every 100 per annum but they did not mention 10% p.a in question.
Prashant Singh said:
9 years ago
For those who don't understand why here 2 is multiplied as in a formula, time is mention as a year. So we are taking a month. Then we have to convert into the year by multiplying 1/2.
Guru said:
9 years ago
I think by taking 105 as the principal amount for last six months, they are partially compounding it. So I think the process is not correct.
Sravani said:
9 years ago
If we take 105 as last 6 months principal then it is not simple interest it's like compound interest.
Kapil said:
9 years ago
Why we divide it by 2 for find the simple interest for 6 months?
Seemanchal das said:
9 years ago
According to Answer:
Let principal is 100
So si= P * R * T/100.
Then we get 5.
Principal for next 6 month is 105.
My question is why 5 is add with principal?
Let principal is 100
So si= P * R * T/100.
Then we get 5.
Principal for next 6 month is 105.
My question is why 5 is add with principal?
Ammu said:
9 years ago
Here we are calculating simple interest in half yearly basis. Then how it become 10.25?
Patel said:
9 years ago
It was S.I. not a compound interest. then why you have consider the 105rs as a sum of next 6 months?
It should be 100 only.
It should be 100 only.
Konok said:
8 years ago
We can find effective interest rate by the following formula.
EAR (effective annual rate) = [(1+r/m)^m]-1.
Where r means interest rate.
Here, m means the number of compounding period.
Here our require ans is [(1+.10/2)^2]-1.
= .1025.
where r = 0.10.
m= 2 ( it is 2 because every six months come two time in a year).
= 10.25 %.
EAR (effective annual rate) = [(1+r/m)^m]-1.
Where r means interest rate.
Here, m means the number of compounding period.
Here our require ans is [(1+.10/2)^2]-1.
= .1025.
where r = 0.10.
m= 2 ( it is 2 because every six months come two time in a year).
= 10.25 %.
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