Question

A firm offers terms of 1/10, net 30.

What effective annual interest rate does the firm earn when a customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b.	What effective annual interest rate does the firm earn if the terms are changed to 2/10, net 30, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

c.	What effective annual interest rate does the firm earn if the terms are changed to 1/10, net 45, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

d.	What effective annual interest rate does the firm earn if the terms are changed to 1/14, net 30, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

   

Answer 1

page or Answer (@) It then 1/ A from offers terms of No net 30. means if the customer pay the amount in 10 days can discount is allowed otherwise the credit period is of 30 -10 =) 20 days ta 18:25 Fax 0.01014), = 1,011. EAR = (10.0101218 365 18.25 = (.20129-1 = 120.129.16 b) If the = 9.041°l. discount is 26. Qlio net 30 7= 2 =) 0.02041 100-2 98 (lt 0.020408) 18:25 2 EAR = - 1 1.445848-1 144.58.7. If the terms is 1/10 net 45 lul 365 days then 1001.-17. 45days-todays 365 days х 991). 35 days = 1.05.1, Iliu net 30. (d) If the terms is 365 days 100%.-1| 365 days x 16 days go days - 14 days 9911. 13091