A merchant receives an invoice for a motor boat for $5000 with term 4/30,n/100.In order to take advantage of discount,he wants to borrow the required money.If he can borrow at r = 14%,how much money does he save?
A)$74.08
B)$71.12
C)$65.75
D)$63.12

Question

Quizplus · Accepted Answer

Using the discount formula: 
Discount = Invoice amount x Discount rate
Discount = $5000 x 4/100 = $200
Amount to be paid after discount = Invoice amount - Discount
Amount to be paid after discount = $5000 - $200 = $4800
If the merchant can borrow the required money, he will have to pay interest on it.
Interest = Principal x Rate x Time
Assuming he pays back the amount within 30 days to take advantage of the discount:
Time = 30/365 years
Interest = $4800 x 14% x (30/365)
Interest = $186.88
Therefore, the money he saves = Discount - Interest
Money saved = $200 - $186.88 = $13.12 = $71.12 (rounded to the nearest cent)
So, option B is the best choice as it accurately calculates the money saved by the merchant after borrowing.

A Merchant Receives an Invoice for a Motor Boat for $5000