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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:

10.15%
10.25%
11.35%
None of these
Explanation:

S.I. for first 6 months = Rs.[(100 x 10 x 1)/(100 x 2)] = Rs. 5

S.I. for last 6 months = Rs.[(105 x 10 x 1)/(100 x 2)] = Rs. 5.25

So, amount at the end of 1 year = Rs. (100 + 5 + 5.25) = Rs. 110.25

Effective rate = (110.25 - 100) = 10.25%
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