Suppose the credit terms offered to your firm by its suppliers are 2/10,net 30 days.Your firm is not taking discounts,but is paying after 22 days instead of Day 30.You point out that the nominal cost of not taking the discount and paying on Day 30 is approximately 37%.But since your firm is neither taking discounts nor paying on the due date,what is the effective annual percentage cost (not the nominal cost)of its costly trade credit,using a 365-day year?
A) 88.3%
B) 70.4%
C) 77.2%
D) 78.9%
E) 84.9%

Question

Quizplus · Accepted Answer

11ea856c_8b67_5ad6_9aec_c1f9451a8b97_TB1222_00 ? EAR = [ 1 + Disc %/(100 - Disc %)] ^{[365/(Actual days - Disc.Period)]} - 1 = 84.87% ?

Suppose the Credit Terms Offered to Your Firm by Its