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 :	Select the correct option.
A) 10%  B) 10.25%  C) 10.5%  D) None of these  E) Cannot be determined
Let the sum be Rs 100. Then,   S.I. for first 6 months = (100×10×1/100×2) = 5   S.I. for last 6 months = (105×10×1/100×2) = 5.25   So, amount at the end of 1 year = (100 + 5 + 5.25) = 110.25.   ∴ Effective rate = (110.25 – 100) = 10.25%.   Answer 10.25%
<result>B</result>
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 :