Company X sells on a 7/24, net 68, basis. Customer Y buys goods with an invoice...
| Company X sells on a 7/24, net 68, basis. Customer Y buys goods with an invoice of $1,180. |
| a. | How much can Y deduct from the bill if it pays on day 24? (Round your answer to 1 decimal place.) | |
| Discount | ||
| b. | How many extra days of credit can Y receive if it passes up the cash discount? (Round your answer to the nearest whole.) | |
| Extra days of credit | ||
| c. | What is the effective annual rate of interest if Y pays on the due date rather than day 24? (Round your answer to 2 decimal places.) | |
| Effective annual rate of interest | ||
Homework Answers
| a] | Amount that can be deducted = 1180*7% = | $ 82.6 |
| b] | Extra credit = 68-24 = | 44 Days |
| c] | Effective annual rate of interest = (1+7/93)^(365/44)-1 = | 82.58% |
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