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X lend Rs.4900 to Y at the rate of 3% pre annum.but, he takes the interest in advance. If he lends a sum for one year, then find the actual rate of interest at which he lends money to Y.
1. 3%
2. 4%
3. 5%
4. 6%

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Correct Answer - Option 1 : 3%

Given

Principal = Rs. 4900

Rate = 3%

Time = 1 year

Formula used

Simple interest = (p × r × t)/100

Where p, r and t are principal, rate and time respectively.

Calculation

Simple interest = (4900 × 3 × 1)/100

⇒ 147

Simple interest is Rs. 147 on Rs. 4900, but X charges interest in advance. It means he gave Rs. 4753 only to Y as a loan.

⇒ 147 = (4753 × r × 1)/100

⇒ (147 × 100)/4753 = r

⇒ 3.09% = r

⇒ 3% = r

∴ Rate of interest is 3%

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