For the year just ended, a firm had average accounts receivable of $90,000 and t
ID: 1155872 • Letter: F
Question
For the year just ended, a firm had average accounts receivable of $90,000 and total credit sales of $700,000. Throughout the year, a factor purchased accounts receivable from the firm at a 1.5% discount. What was the firm’s effective interest rate paid on its receivables financing? a. 8.6% b. 10.9% c. 11.9% d. 12.5% e. 13.2% For the year just ended, a firm had average accounts receivable of $90,000 and total credit sales of $700,000. Throughout the year, a factor purchased accounts receivable from the firm at a 1.5% discount. What was the firm’s effective interest rate paid on its receivables financing? a. 8.6% b. 10.9% c. 11.9% d. 12.5% e. 13.2% For the year just ended, a firm had average accounts receivable of $90,000 and total credit sales of $700,000. Throughout the year, a factor purchased accounts receivable from the firm at a 1.5% discount. What was the firm’s effective interest rate paid on its receivables financing? a. 8.6% b. 10.9% c. 11.9% d. 12.5% e. 13.2%Explanation / Answer
Answer:
The firm’s effective interest rate paid on its receivables financing is :
Answer: d. 12.5%
Effective interest rate formula
r= (1+i/n)n - 1