The Delta Fish Hatchery factors its accounts receivables immediately at a 1.5 percent discount. The average collection period is 34 days. Assume that all accounts are collected in full. What is the effective annual interest rate on this arrangement?

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Interest rate for 34 days = 0.015/(1 - 0.015) = 0.015228Number of periods per year = 365/34 = 10.735294Effective annual rate = 1.015228^10.735294 - 1 = 17.61 percent

The Delta Fish Hatchery Factors Its Accounts Receivables Immediately at a 1.5