Ch20 A firm offers terms of 2.6/7, net 30. Solve for C and D What effective annu
ID: 2653385 • Letter: C
Question
Ch20
A firm offers terms of 2.6/7, net 30. Solve for C and D
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 final answer to 2 decimal places. (e.g., 32.16))
What effective annual interest rate does the firm earn if the terms are changed to 3.6/7, net 30, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
What effective annual interest rate does the firm earn if the terms are changed to 2.6/7, net 45, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
What effective annual interest rate does the firm earn if the terms are changed to 2.6/12, net 30, and the customer does not take the discount? (Use 365 days a year. Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
a.
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 final answer to 2 decimal places. (e.g., 32.16))
Explanation / Answer
Answer c. Formula is, Cost of Credit = Discount %/(100-Discount %) x (360/(Full allowed payment days - Discount days)) Cost of Credit = (2.6/(100-2.6)) x 365/(45-7) =25.64% answer is 25.64% Answer d. Cost of Credit = (2.6/(100-2.6)) x 365/(30-12) =54.13% Answer is 54.13%