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A money-lender charges interest at the rate of 10 rupees per 110 rupees semi-annually, payable in advance. Then

Match the LIST-I with LIST-II

LIST-ILIST-II
A. rate per conversion period (ii)I. 2
B. nominal rate (r)%II. 21
C. number of period in a year (m)III. 20
D. effective rate of interest (rer_e)%IV. 0.1

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 2

Interest paid in advance means 10 is charged on the 100 actually received, so i=0.1i=0.1 (IV).

Semi-annual compounding gives m=2m=2 (I).

Nominal rate r=mi=20%r=mi=20\% (III).

Effective rate =(1.1)2−1=0.21=21%=(1.1)^2-1=0.21=21\% (II).

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