A merchant receives an invoice for a motor boat for $5000 with term 3/30,n/100.In order to take advantage of discount,he wants to borrow the required money.If he can borrow at r = 18%,how much money does he lose (negative)or save (positive)?
A)-$17.42
B)-$22.60
C)$22.60
D)$17.42

Question

Quizplus · Accepted Answer

The merchant saves money by taking the discount. The discount is 3% of $5000, which equals $150. So, the merchant pays $4850 if he takes the discount. If he borrows $4850 at 18% annual interest for 30 days, the interest cost is (4850 * 0.18 * 30/365) = $71.58. The net saving is $150 - $71.58 = $78.42. However, since the question asks how much he loses or saves by borrowing the money to take advantage of the discount, and the options provided do not match the calculated savings, there seems to be a misunderstanding in the calculation or interpretation of the options. Given the options, none directly reflect the calculated savings, suggesting a need to re-evaluate the calculation or the interpretation of the question. However, choosing the closest match or understanding the question as asking for the closest option, there seems to be a mistake in the calculation process as per the provided options.

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