An automobile financier claims to be lending money at S.I., 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?
Choose one:
A) 10.26%
B) 10.25%
C) 10.85%
D) 17.25%
E) 10.35%
Let the sum be Rs. 100. Then,   S.I. for first 6 months = (100 * 10 *1) / (100 * 2) = Rs. 5   S.I. for last 6 months = (105 * 10 * 1) / (100 * 2) = Rs. 5.25   So, amount at the end of 1 year = (100 + 5 + 5.25) = Rs. 110.25   Effective rate = (110.25 - 100)= 
<gadget id="calculator">(110.25 - 100)</gadget>
<output>10.25</output>
10.25%.   Answer:10.25%
<result>B</result>
An automobile financier claims to be lending money at S.I., 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?