What effective interest rate is charged to a purchaser receiving terms of 5/10, net 90 if the purchaser avoids the discount and pays in 90 days?
A) 20.00%
B) 22.81%
C) 24.93%
D)26.37%

Name: What effective interest rate is charged to a purchaser receiving terms of 5/10, net 90 if the purchaser avoids the discount and pays in 90 days? A) 20.00% B) 22.81% C) 24.93% D)26.37%
Brand: Quizplus
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Question

Quizplus · Accepted Answer

EAR = [1 + (0.05/(1 - 0.05))]^{365/(90 - 10)} - 1 = 0.2637, or 26.37%

What Effective Interest Rate Is Charged to a Purchaser Receiving