Question

Intro A supplier hands you an invoice for $41,000 with the terms 3/10, net 60. I Attempt 1/5 for 10 pts. Part 1 What is the implicit interest rate (not annualized) you are charged if you forgo the discount and pay as late as possible? 3+ decimals Submit IB Attempt 1/5 for 10 pts. Part 2 What is the implicit interest rate (expressed as an annual percentage rate) you are charged if you forgo the discount and pay as late as possible? 2+ decimals Submit

Answer 1

Invoice Amount = $ 41000

Discount days = 10 days

Full period allowed =  60 days

Calculation of implicit interest rate : -

Implicit Interest rate = Discount / (1-Discount rate )

= 0.03 / (1-0.03)

= 0.03 / 0.97

= 0.03092

= 3.092%

Calculation of implicit interest rate (Annualized) : -

Implicit Interest rate =

  $\frac{Discount}{1-Discount} * \frac{365}{(Full period allowed-Discount Days)}$

= 0.03 / (1-0.03) * 365 / (60-10)

= 0.03092*7.3

= 0.225716

= 22.5716 %