ACME Inc.,has credit terms of 2/15 net 45.Customers should take the discount and pay in 15 days if they CANNOT earn more than ________ (EAR)on their investments.
A)17.81%
B)27.86%
C)24.83%
D)16.55%

Question

Quizplus · Accepted Answer

The effective annual rate (EAR) can be calculated using the formula for the discount: EAR = [(1 + (Discount / (1 - Discount)))^(365 / (Full Payment Period - Discount Period))] - 1. Plugging in the values: EAR = [(1 + (0.02 / (1 - 0.02)))^(365 / (45 - 15))] - 1 = 27.86%.

ACME Inc,Has Credit Terms of 2/15 Net 45