An automobile financier claims to be lending money at simple interest, but he in

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Question: 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:

Options are:

A.     10%
B.     10.25%
C.     10.5%
D.     None of these

Correct answer is:

B.     10.25%