Q1. A dealer offers three successive discounts of 50%, 10% and 20% on an article. What is the single effective discount rate?
A 60%
B 64% Correct
C 69%
D 72%
Explanation
Take the marked price as 100. After a 50% discount, the price becomes 50. A further 10% discount makes it 45. A further 20% discount makes it 36. Thus the customer pays 36 out of the original 100, so the total discount is 64%. A 60% discount would leave the price at 40, not 36. The rates 69% and 72% overstate the reduction because successive discounts are applied on the reduced price, not on the original price every time.