On April 14,McCallister's purchased $10,000 worth of inventory.The terms of sale were 2/10,net 30.The implicit interest is _____ and the effective annual rate is _____ percent.

Question

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Implicit interest = 0.02 × $10,000 = $200; Days of credit granted = 30 - 10 = 20 days; Periods per year = 365/20 = 18.25; Interest rate for 20 days = [0.02 × $10,000]/[(1 - 0.02) × $10,000] = 0.0204; Effective annual rate = (1.)^18.25 - 1 = 44.59 percent

On April 14,McCallister's Purchased $10,000 Worth of Inventory