Question

Calculate the nominal annual cost of trade credit under each of the following terms. Assume a 365-day year. Do not round intermediate calculations. Round your answers to two decimal places.

1. 1/15, net 30.

     %

2. 2/10, net 55.

     %

3. 3/10, net 50.

     %

4. 2/10, net 50.

     %

5. 2/15, net 40.

     %

Answer 1

Cost of trade credit: = (1+D=(1-D)(365:n)-1 In is Number of days after discount period a Nominal annual cost of trade credit 27.71% b Nominal annual cost of trade credit 17.81% c Nominal annual cost of trade credit d Nominal annual cost of trade credit e Nominal annual cost of trade credit 32.04% 20.24% 34.31% = (1+1%/(1-1%)(365/15)-1 = (1+2%/(1-2%)/365/45)-1 = (1+3%/(1-3%)(365/40)-1 = (1+2%/(1-2%)(365/40)-1 = (1+2%/(1-2%)/(365/25)-1

*Please rate thumbs up