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 after one year becomes:
Choose the correct choice.
A) 10.25%  B) 10.5%  C) 10.75%  D) 10%  E) None of these
Explanation :   Let the automobile financier lends Rs.100   Simple Interest for first 6 months = PRT/100=100×10×12/100=Rs. 5   After 6 months, he adds the simple interest to principal   i.e., after 6 months, principal becomes Rs.100 + Rs.5 = Rs.105   Simple Interest for next 6 months = PRT/100=105×10×1/2 /100=Rs. 5.25   Amount at the end of 1 year = Rs.105 + Rs. 5.25 = Rs.110.25   i.e., Effective Simple Interest he gets for Rs.100 for 1 year = 110.25 - 100= 
<gadget id="calculator">110.25 - 100</gadget>
<output>10.25</output>
10.25   i.e, the Effective Rate of Interest= 10.25%   (∵R = 100×SI/PT=100×10.25/100×1=10.25%)   10.25%nswer : Option 10.25%
<result>A</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 after one year becomes: