A person claims to lend his money at the rate of 20% p.a. simple interest. However he takes interest in advance when he lends a sum for one year. At what interest rate does he lend the money actually?
Answer & explanation
Correct answer: option 3
Let 100 be the Principal, then 20 will be interest for one year
Now, since interest was already included in the sum, so the actaul sum will be 80
rate = \(\frac{20}{80}\) x 100 = \(\frac{1 }{4}\)% = 25%