If credit terms are 2/30,net 60,what is the effective annual rate for a customer's loan when the customer pays the invoice in 60 days?
A) 44%
B) 16%
C) 59%
D) 11%
E) 28%

Question

Quizplus · Accepted Answer

Step 1 - Compute the number of periods in a year.
60 - 30 = 30 days. 11ea7fdb_fc3f_b3ec_a768_8b7680230186_TB2902_11 = 12.167
Step 2 - Compute the percentage holding cost per period. 11ea7fdb_fc3f_dafd_a768_8fa3535db400_TB2902_11 = 0.02041
Step 3 - Compute the EIR.
EIR = 11ea7fdb_fc3f_dafe_a768_4df286f99da8_TB2902_11 - 1
EIR = 11ea7fdb_fc3f_daff_a768_1d627debbb34_TB2902_11 - 1
EIR = 0.2787 or 28%

If Credit Terms Are 2/30,net 60,what Is the Effective Annual