An automobile financier claims to be lending money at simple interest, but he includes the interest every 4 months for calculating the principal, if he is charging an interest of 12%, then the effective rate of interest is approximately

Let principle amount = 1000

SI for first 4 months = $$\frac{1000 * 12 * 1}{100 * 4}$$ = 30

SI for second 4 months = $$\frac{1030 * 12 * 1}{100 * 4}$$ = 30.9

SI for third 4 months = $$\frac{1060.9‬ * 12 * 1}{100 * 4}$$ = 31.827

SI for last 4 months = $$\frac{1092.727‬‬ * 12 * 1}{100 * 4}$$ = 32.78181‬

Total amount at the end of 1 year = 1092.727 + 32.78181‬‬ = 1125.50881‬

Effective interest = $$\frac{1125.50881 - 1000‬}{10}$$ = 12.55% = 12.5% (Approx)