Homework Answers
Discount rate = 2%
Discount period = 20 days
Credit period = 40 days
Nominal Cost of Trade Credit = [Discount rate / (1 - Discount
rate)] * [365 / (Credit period - Discount period)]
Nominal Cost of Trade Credit = [0.02 / (1 - 0.02)] * [365 / (40 -
20)]
Nominal Cost of Trade Credit = [0.02 / 0.98] / [365 / 20]
Nominal Cost of Trade Credit = 0.3724 or 37.24%
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